Showing posts with label Standard and Poor's. Show all posts

18 August 2011

Bachmann said Standard & Poor's downgrade proved she was right from POLITIFACT 12AUG11

HERE'S another Christian republican presidential candidate who finds it necessary to lie about, distort and manipulate information on the national debt and the recent debt ceiling "crisis". One might excuse her because she is stupid (and I think she really is stupid) but I don't buy that as an excuse. I think michele bachmann is a scheming FOTZE, a political whore who is completely controlled by the gop and tea-bagger political parties, serving their corporate masters. From Politifact...

The Truth-O-Meter Says:

When Standard & Poor's "dropped our credit rating, what they said is, we don't have an ability to repay our debt. ... I was proved right in my position" that the debt ceiling should not have been raised.

Michele Bachmann on Thursday, August 11th, 2011 in a debate in Ames, Iowa

Bachmann said Standard & Poor's downgrade proved she was right

If you made a list of House Republicans who were the biggest opponents of raising the debt ceiling, Michele Bachmann would be near the top.

Bachmann, R-Minn., and a Republican candidate for president, said consistently that she would not vote for an increase in the debt ceiling -- the legal limit on how much money the government can borrow -- regardless of the terms of the deal.

She repeated her opposition at a Republican debate in Ames, Iowa, on Aug. 11, 2011, when asked if she was concerned about the United States defaulting and not paying its debts.

"If you had your way, the debt ceiling would not have been raised," said Susan Ferrechio, a debate moderator. "What do you say to analysts who insist that Americans' investments, their 401(k)s, their college funds would have been far worse off today?"

"I think we just heard from Standard & Poor's," Bachmann said. "When they dropped our credit rating, what they said is, we don't have an ability to repay our debt. That's what the final word was from them. I was proved right in my position. We should not have raised the debt ceiling. And instead, we should have cut government spending, which was not done. And then we needed to get our spending priorities in order."

Is that what Standard & Poor's said? And did the report support her position that the debt ceiling should not have been raised? Her statement was a disputed point in the post-debate analysis, so we decided to check it out for ourselves. (We should also note that her claim that the deal did not cut government spending is questionable at best. The nonpartisan Congressional Budget Office said that the deal would cut "at least $2.1 trillion" between 2012 and 2021.)

A little background: Standard & Poor's is a New York-based ratings agency that studies the financial markets. It issues guidance to investors and rates various investments for financial risk. On Aug. 5, it downgraded its credit rating for the United States one notch, from the top-rated AAA to AA+. (The other two ratings agencies, Moody's and Fitch, did not lower the U.S. rating.)

The Obama administration strongly objected to the ratings downgrade and disputed Standard & Poor's analysis. Others criticized the company for its performance in previous years, when it gave high ratings to mortgage securities that subsequently proved worthless.

The downgrade didn't seem to have much effect on investors' desire to hold U.S. Treasury bonds and other securities, which are still widely perceived as safe investments.

Bachmann said that when Standard & Poor's dropped the rating, "what they said is, we don't have an ability to repay our debt" and she said it supported her position that the ceiling should not have been raised and that spending should have simply been cut. Bachmann also opposed any type of tax increases, including closing loopholes, which Democrats supported.

To fact-check Bachmann, we read Standard & Poor's original report on why it issued its downgrade.

To put it in simple terms, Standard & Poor's had two main reasons for the downgrade: First, that the size of the U.S. debt is very large and growing, and second, that politicians seem unable to agree on what steps to take to reduce it. It called the political process "contentious and fitful," and said the firm was "pessimistic" that the White House and Congress would be able to agree on measures to significantly reduce the debt anytime soon.

"The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy," the report said.

The report does not say that the debt ceiling should not have been raised. If anything, there's an unstated assumption that increasing the debt ceiling was necessary. "The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy," the report said.

And in an interview on Fox News, Standard & Poors' managing director John Chambers seemed to express disapproval that it took so long for Congress to raise the debt ceiling. He said President Barack Obama "characterized the political system as dysfunctional, I think that's a good word. We got to a position where we were within 10 hours of having a major cash flow problem. This is not what happens in other countries," Chambers said on Aug. 8.

Another official with Standard & Poor's, director Joydeep Mukherji, told POLITICO that the stability of American political institutions were undermined by the fact that "people in the political arena were even talking about a potential default." He didn't mention who those people were. "That a country even has such voices, albeit a minority, is something notable," he added. "This kind of rhetoric is not common amongst AAA sovereigns."

As to which political party was in the right, the ratings agency did not explicitly tip its hand. The report said it took no position on whether taxes should be raised or spending should be cut.

In the Fox News interview, Chambers was asked if the tea party movement was responsible for the downgrade as Democrats alleged. He declined to take the bait and assign blame.

"I think that there's lots of blame to go around, and what we need to come to in the United States is a way of forging consensus, so that we can take the tough choices that lie ahead, because the fiscal situation in the United States is not sustainable," he said.

Bachmann said that when Standard & Poor's "dropped our credit rating, what they said is, we don't have an ability to repay our debt. That's what the final word was from them. I was proved right in my position. I was proved right in my position."

In fact, because the debt ceiling was raised, the United States is paying its debts. What Standard & Poor's actually said was that politicians in Washington can't agree on long-term solutions for how to reduce the debt -- not that the country is or was unable to pay its debts. The notion that the report supported her position is wishful thinking. For that, we rate her statement False.

06 August 2011

China Blasts U.S. Over Credit Rating Downgrade, Debt 'Addiction' 6AUG11

PEOPLE don't like this, but there is some truth to what the government of the prc says concerning our fiscal policies (though they should have directed their criticisms at corporate welfare and tax cuts for the rich) and the government circus in D.C. They are typically hypocritical though because they refuse to float their currency, refuse to allow true economic freedom, impose restrictive tariffs on imports, refuse to enforce their own laws on labor rights and so keep production cost artificially low, have a huge income inequality problem that will cause more social unrest, and underfund their own social safety net programs (pensions, healthcare, etc) while spending massive amounts on their own military. The prc is a disaster just waiting to happen because of their own dysfunctional government policies. So they can express their opinions on the situation in the U.S., but before demanding anything from the U.S. they should consider their own precarious situation first. From HuffPost.....
BEIJING -- China, the largest foreign holder of U.S. debt, demanded Saturday that America tighten its belt and confront its "addiction to debts" in the wake of Standard & Poor's decision to downgrade the U.S. credit rating.
China currently owns $1.2 trillion of U.S. Treasury debt, the largest stake of any central bank. The commentary carried by the state-run Xinhua News Agency was Beijing's first official response to the S&P decision.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua said.
It said the rating cut would be followed by more "devastating credit rating cuts" and global financial turbulence if the U.S. fails to learn to "live within its means."
"China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," it said.
Xinhua said the U.S. must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.
Last month, China's top general, Chen Bingde, also linked America's financial woes to its military budget and asked whether paring back on defense spending wouldn't be the best thing for U.S. taxpayers.
Such comments reflect Beijing's desire that Washington reduce its military presence in Asia. The U.S., rattled by China's military buildup, also routinely chides Beijing for its fast-growing defense spending.
Xinhua also suggested a new global reserve currency might be necessary to replace the dollar, a position China has frequently advocated.

"Mounting debts and ridiculous political wrestling in Washington have damaged America's image abroad," Xinhua said. "To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means."
Jitters over the U.S. handling of its debt problems were also being felt elsewhere in Asia, said Kishore Mahbubani, Singapore's former ambassador to the United Nations.
The dean of Singapore's Lee Kuan Yew School for Public Policy said the last-minute agreement by the U.S. Congress to lift the debt limit and avoid default has policymakers in Asia questioning the stability of U.S. global leadership.
"It's definitely undermined U.S. credibility," Mahbubani said late Friday. "Everyone is wondering if you have such a dysfunctional political process, how can you provide global leadership. It's very dangerous for the world."
___
Associated Press writer Alex Kennedy in Singapore contributed to this report.

S&P downgrades U.S. credit rating for first time & S&P Downgrades U.S. Credit Rating From AAA 5 & 6AUG11

I doubt this will motivate Congress to put aside politics and get to the business of governing. The repiglicans and tea-baggers are to blame for the failed budget negotiations....I know an agreement was reached but they insisted in protecting the greed of the wealthy and corporate America and the democrats and Pres Obama lacked the moral courage to stand up to them and demand revenue increases be part of any agreement. The government has taken us one step closer to being a plutocracy and a Third World nation. From the WashPost & NPR....

By Zachary A. Goldfarb

Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.
Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.
“It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit.
The decision came after a day of furious back-and-forth debate between the Obama administration and S&P. Treasury Department officials fought back hard, arguing that the firm’s political analysis was flawed and that it had made a numerical error in a draft of its downgrade report that overstated the deficit over 10 years by $2 trillion. Officials had reviewed the draft earlier in the day.
“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said Friday night.
The downgrade to AA+ will push the global financial markets into uncharted territory after a volatile week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States.
The AAA rating has made the U.S. Treasury bond one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees.
Treasury bonds have also been a stalwart of stability amid the economic upheaval of the past few years. The nation has had a AAA rating for 70 years.
Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.
A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.
But the exact effects of the downgrade won’t be known until at least Sunday night, when Asian markets open, and perhaps not fully grasped for months. Analysts say the initial effect on the markets could be modest because they have been anticipating an S&P downgrade for weeks.
Federal officials are also examining the impact of a downgrade in large but esoteric financial markets where U.S. government bonds serve an extremely important function. They were generally confident that markets would hold up but were closely monitoring the situation. Regulators said that the downgrade would not affect how banking rules treat Treasury bonds — as risk-free assets.
The ratings action immediately fueled partisan wrangling Friday night. Allies to President Obama said it underscored his call for a “grand bargain” that would trim $4 trillion from the federal budget involving a mix of tax revenue and spending cuts.
Republicans criticized Obama’s handling of the economy.
“Standard & Poor’s rating downgrade is a deeply troubling indicator of our country’s decline under President Obama,” Republican presidential candidate Mitt Romney said.
S&P has angered government officials with aggressive warnings during the past few months of a potential downgrade. S&P corrected its draft report Friday after Treasury raised concerns about the math.
Over the past few months, the multiple warnings from S&P have not worried government bond markets. What’s more, the two other major credit rating companies, Moody’s Investors Service and Fitch Ratings, have said they would preserve the nation’s AAA rating for now.
S&P’s downgrade was as much a political critique as a financial conclusion. It is based on a view that U.S. political leaders would be unable to come up with at least $4 trillion in savings, which is needed to bring the nation’s debt to a manageable level over the next decade.
The debt deal swung earlier this week proposed spending cuts in two phases. Democrats and Republicans agreed to the first round, worth nearly $1 trillion. But a congressional committee must decide on the remaining $1.2 trillion to $1.5 trillion — and S&P questioned whether that would ever happen.
S&P added that it expects that the upper income Bush-era tax cuts will continue, despite vows from Obama to end the breaks next year.
“The majority of Republicans in Congress continue to resist any measure that would raise revenues,” the firm said.
S&P’s downgrade served as an indictment of the gridlock that sent the nation to the edge of defaulting on its debt obligations. It is also striking in part because it reflects the tremendous power of a small group of financial analysts employed by a New York company — part of McGraw-Hill. Credit-rating companies’ reputations were sullied during the financial crisis.
In Europe, political leaders have taken aim at credit rating companies when they cut the ratings of governments struggling with heavy debt burdens.
S&P said the nation could suffer additional downgrades later on if the nation’s debt burden grows worse. “A new political consensus might [or might not] emerge after the 2012 election, but we believe that by then the government debt burden will likely be higher,” the firm said.
The company said the United States’s financial position was diverging from that of other AAA countries, including Canada, France, Germany and Britain.
Countries with a AA+ rating include New Zealand and Belgium. Among those countries with a AA rating, one notch lower, are Bermuda, Spain and Qatar.

Staff writers Neil Irwin and Cezary Podkul contributed to this report.

S&P Downgrades U.S. Credit Rating From AAA

by The Associated Press

The United States has lost its coveted top AAA credit rating.

Complete Coverage

S&P Lowers U.S. Long-Term Credit Rating Aug. 5, 2011

Credit rating agency Standard & Poor's on Friday downgraded the nation's rating for the first time since the U.S. won the top ranking in 1917. The move came after Congress haggled over budget cuts and the U.S. government borrowing limit — and failed to cut enough government spending to satisfy S&P. The issue has contributed to convulsions in financial markets.
The drop in the rating by one notch to AA-plus was expected. The three main credit agencies, which also include Moody's Investor Service and Fitch, had warned during the budget fight that if Congress did not cut spending far enough, the country faced a downgrade. S&P said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation. Moody's said Friday it was keeping its AAA rating on the nation's debt, but that it might still lower it.
One of the biggest questions after the downgrade was what impact it would have on already nervous investors. Many financial analysts said investors were expecting a downgrade. But some selling was expected when stock trading resumed Monday morning. The Dow Jones industrial average fell 699 points this week, the biggest weekly point drop since October 2008.
"I think we will have a knee-jerk reaction on Monday," said Jack Ablin, chief investment officer at Harris Private Bank.
One fear in the market has been that a downgrade would scare buyers away from U.S. debt. If that were to happen, the interest raid paid on U.S. bonds, notes and bills would have to rise to attract buyers. However, even without its AAA rating, U.S. debt is seen as one of the safest investments in the world. And investors clearly weren't being scared away this week. While stocks were plunging, investors were buying Treasuries. The yield on the 10-year note, which moves opposite its price, fell to a low of 2.39 percent on Thursday.
The government fought the downgrade. Administration sources familiar with the discussions contended that the S&P analysis was fundamentally flawed. They spoke on condition of anonymity because they weren't authorized to discuss the matter publicly. S&P had sent the administration a draft document in the early afternoon Friday and the administration, after examining the numbers, challenged the analysis.
In a statement, Treasury said, "A judgment flawed by a $2 trillion error speaks for itself."
S&P said that in addition to the downgrade, it is issuing a negative outlook, meaning that there was a chance it will lower the rating further within the next two years. It said such a downgrade to AA would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period.
In its statement, S&P said that it had changed its view "of the difficulties of bridging the gulf between the political parties" over a credible deficit reduction plan.
S&P said it was now "pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon."

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18 August 2011