Credit Rating Agencies

There have been many reactions to S & Ps action in downgrading the credit rating of the US, Apart from the widespread annoyance and repudiation of S & P and its procedures, there are some who are saying that it won't have much effect on interest rates. Others even saying that it is a “non-event,” and still others saying that S & P should be investigated and prosecuted on a number of grounds. However, I found two views of the “non-event” particularly interesting. Read below the fold...

Last December, my friend beowulf had this to say at the time Moody's began to make noises about downgrading US debt. He said:

”I don’t think we’ll see Moody’s or any other rating service based in the US ever downgrade US Treasuries. It would cause a tremendous amount of financial loss and would leave Moody’s and its executives exposed to criminal prosecution. If I were Moody’s general counsel, I’d tell the CEO in no uncertain terms, Do Not Tug On Superman’s Cape.

14th Amendment, Sect. 5

Read below the fold...

(Author's Note: In December I posted a piece on Moody's threat to downgrade the US's Rating in International Bond markets. I argued that Moody's action was foolish. Today, Standard and Poor's actually revised the US ratings outlook from stable to negative, but continued its sovereign credit rating at ‘AAA/A-1+’. Read below the fold...

Yesterday, as reported in Money News, Moody's made me laugh, with the following pronouncements:

” . . . it could move a step closer to cutting the U.S. Aaa rating if President Barack Obama's tax and unemployment benefit package becomes law. . . .

“The plan agreed to by Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years . . .

“A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.

“For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasurys, which currently rank as among the world's safest investments.

"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday.”

Read below the fold...