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Soldiers of Foreign Wars • View topic - US Credit Downgraded



 
 
 
 
 
 
 

US Credit Downgraded

Postby [SOFW]BanG » Sat Aug 06, 2011 1:07 am

U.S. credit rating downgraded

By JOSH BOAK & CARRIE BUDOFF BROWN - POLITICO - 8/5/11 8:18 PM EDT Updated: 8/5/11 9:31 PM EDT

Standard and Poor’s on Friday downgraded the nation’s top-notch triple-A credit rating, the first downgrade in U.S. history and a dramatic vote of no-confidence in the world’s largest economy and its political leadership.

“We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA,’” S&P said in a statement.

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.”

The ratings agency put forth a blistering view of Washington partisanship, adding that “we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy.”

One lawmaker offered an equally biting retort. Rep. Barney Frank (D-Mass.) angrily denounced the ratings downgrade and said the credit agency has a “terrible record.”

“These are some of the people who have the worst records of incompetence and irresponsibility around,” he said on MSNBC’s “Rachel Maddow Show.”

“I would urge people: Pay no attention to these people.” Frank, the top Democrat on the House Financial Services Committee, also said S&P was “trying to justify their reputation” after failing to spot problems in the nation’s financial system before the economic crisis of 2008.

S&P had notified the White House earlier Friday that it planned the downgrade, a senior administration official told POLITICO. The White House challenged the agency’s analysis and said it was off by at least $2 trillion dollars. S&P agreed to withhold a final decision and take another look, the official said.

"A judgment flawed by a $2 trillion error speaks for itself” a Treasury spokesman told reporters in a conference call after S&P’s downgrade. S&P officials had spent time at the Treasury Department this week, and administration officials were prepared for an announcement to be made after the market close on Friday.

President Barack Obama and congressional leaders had hoped this week’s deal to raise the debt ceiling would stave off any downgrading of the U.S. credit rating – but Standard and Poor’s had left open the door to a downgrade if the final deal didn’t reach budget cuts of $4 trillion.

The final deal would cut at least $2.1 trillion over 10 years. Rumors of a downgrade filtered through a volatile stock market, causing the Dow Jones Industrial average to swing by 416 points as it teetered between losses and gains to close the day up slightly by 0.54 percent.

The possibility of a downgrade overwhelmed the initial surge caused by a government report showing the economy had added 117,000 jobs in July, beating analyst expectations.

With U.S. household net worth totaling about $58 trillion and the national debt slightly more than $14 trillion, the country has the resources to honor its debt, indicating that a downgrade would be a commentary on the sharp political divisions splitting Washington.
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