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Yesterday morning there was a political stunt pulled by the financial ratings agency, Standard & Poor's. S&P didn't actually downgrade the AAA credit rating of the U.S. government as several teevee talkers hysterically claimed, instead they "downgraded their outlook" of the credit worthiness of the U.S. government from "neutral" to "negative."
The S&P said the move signals there's at least a one-in-three likelihood that it could lower its long-term rating on the United States within two years.
"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.
"Very large budget deficits" is not some surprise....and the national debt doubled from 2001-2008, not exactly yesterday morning's newsflash. As far as the "path to addressing these (issues) is not clear to us" part......when, since the middle 90's, has the path to anything in Congress been "clear."
As a result of this stunt, the DOW index fell some 240 points after the market opened, eventually climbing back to close down 140 points. Now, the huge movement in the stock market may have, in itself, been the purpose of S&P's announcement. The players in the Wall Street casinos manipulate the market all of the time. But it could have been that the money and paper shufflers were acting pre-emptively because they effed everything up before the mortgage meltdown. That big financial freight train crash that they didn't see coming.
However, make no mistake.....this was a stunt. The U.S. government is in no danger whatsoever of defaulting on it's debt. Even leading House Republicans, Speaker Boehner and Paul Ryan, have stated unequivocably that they will not allow the nation to default on it's obligations by holding up an agreement next month to increase the nation's debt ceiling.
Sure, Tea Party fanatics and opportunistic Republican clowns are talking in tongues about the debt ceiling issue. But as we saw in the "fight" just a week or so ago on the 2011 budget....Republicans didn't follow through with their threat to close down the government. Not raising the nation's credit card limit would be even riskier. Additionally, Republican elected officials work for the big banksters, as do many Democrats, and the banksters do not want any interruption in national debt paying.
We're still a couple of weeks away from debt-bomb day....so we'll see if my predictions are correct.
But in the meantime, let's take a look at Standard & Poor's track record on rating, you know, important and crucial stuff.....say, like mortgage backed bonds.....
The spotlight will focus first on rating agencies like Moody’s and
Standard & Poor’s, because the mortgage-backed bonds that plunged in value in recent weeks were highly rated by these agencies until they downgraded billions worth of them in July.
On July 10, Standard & Poor’s announced it was downgrading $7.3 billion worth of securities sold in late 2005 and 2006, and the ensuing conference call quickly turned testy. Steven Eisman, a portfolio manager at Front Point Partners, an investment firm that had made a major bet against the subprime mortgage market, did not mince words.
“I’d like to know why now?” Mr. Eisman demanded to know. “Why didn’t you do this many, many months ago?”
Indeed....why didn't they?
ACA Financial Guaranty's business in 2008 was "guaranteeing complex securities like those tied to subprime mortgages."
For years, S&P, the only credit-rating agency to follow ACA, bestowed a high-quality A rating on the insurer. Then, on Dec. 19,(2007) the agency cut ACA's grade from A to CCC overnight, a rare move for S&P.
Before the downgrade, S&P's opinion on ACA diverged from the stock market's. Shares of the insurer's parent company, ACA Capital Holdings (ACAH), which started sliding in June, had dropped 95%, to 50 cents, by the time the rating was cut in December.
Several of the biggest failures in the financial meltdown were the ratings agencies.....like Standard & Poor's. The incestuous relationship that exists in the black hole pit of Wall Street influence peddling has, I think, made ratings agency ratings, insignificant. Fund managers and the like still depend on these agencies.....but after their multiple failures... Dotcom, Enron, WorldCom, housing crash....I have no idea why.
Whatever it was that S&P was doing yesterday....it should be viewed with extreme skepticism. Just as the White House did....
"We believe S&P's negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation," said Mary Miller, Assistant Treasury Secretary for Financial Markets.
The Reverend's response would have been slightly more...umm...confrontational. Something like..."what the hell would you guys know?"