S&P—The New Villain Of Obama Administration
Senate is upset with Standard & Poor (S&P) and they want to investigate them for downgrading US’s rating one notch from the coveted AAA grade. Senate Banking Committee Chairman Tim Johnson lashed out, “As the financial markets stumble, investors continue to regard Treasury debt as a safe haven in times of economic uncertainty. This irresponsible move by S&P may, however, have spillover effects that tax the American people by increasing interest rates on home loans, credit cards, and car loans, and by increasing the cost of finance for some state and local governments. I am deeply disappointed in S&P’s decision to enter into the game of political punditry.”
Not to be undermined by this, the Treasury Secretary Timothy Geithner shot out, “They've shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement.”
Those are strong words.
S&P is the new villain in the financial world for downgrading the credit rating of USA. It is the same rating agency that had consistently given the failed Lehman Brothers and other financial institutions top rating when they did not deserve that. Was S&P bad then, or, are they bad now?
What is a triple-A rating by the way and what does it mean?
In the rating business there are two major houses, S&P and Moody’s, who are market mover and both have been caught napping during the past major financial turmoil. This time however, S&P appears to be wising up and inclined to mend their reputation. On April 18, 2011,S&P had warned that a debt ceiling increase without meaningful budget reforms would still merit a downgrade. The long term US fiscal imbalance is nothing new and it had been in the making for at least two decades now. S&P had correctly pointed out that if the politicians do not wake up now and refrain from silly game playing, a future default becomes a significant risk.Continued on the next page