AA+ Archives – EzKool

S And P On A Downgrade Rampage

On Friday, the rating agency, S&P downgraded the United States credit from AAA to AA+. A move the agency claims was necessary because of the constant political battles fought in Washington by the two political parties. Then today, S&P added even more to their downgrade list. CBS reports;

Standard & Poor’s Ratings Services on Monday downgraded the credit ratings of mortgage lenders Fannie Mae and Freddie Mac and other agencies linked to long-term U.S. debt.

The agency also lowered the ratings for: farm lenders; long-term U.S. government-backed debt issued by 32 banks and credit unions; and three major clearinghouses, which are used to execute trades of stocks, bonds and options.

All the downgrades were from AAA to AA+. S&P says the agencies and banks all have debt that is exposed to economic volatility and a further downgrade of long-term U.S. debt. Their creditworthiness hinges on the U.S. government’s ability to pay its own creditors.

Ten of the country’s 12 Federal Home Loan Banks also were downgraded from AAA to AA+. The banks of Chicago and Seattle had already been downgraded earlier to AA+.

After receiving the first downgrade in the history of the nation, the politicians joined together and attacked S&P for its decision. On the Sunday talk shows, the suggestion was made that S&P should not be trusted, because of their long history of misleading information. Politicians also criticized S&P for what they called, a “$2 trillion mistake,” in the agency’s math when they decided to downgrade America’s credit to AA+ status.

But regardless of what the talking points are in Washington, and the criticism of S&P, one thing the agency said is correct, and reflects the unfortunate nature in Washington. S&P called out the parties involved and criticized their failure to compromise, as the main force responsible for their downgrade decision.

America’s Credit Downgraded, Another Win For Republicans

The Standard & Poors rating agency has, for the first time in America’s history, downgraded America’s Credit ratings, from a Triple A rating to AA+ ratings. The agency cites the political system in Washington as one of the reasons why the credit downgrade happened.

“We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see “Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government’s other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.”

A credit downgrade is serious business. It means that interest rates on the government, banks and ultimately the American people can rise. Borrowing money at a higher interest rate means we all pay back more towards our debt, whether it’s the government borrowing from China, or a middle class American borrowing to buy a home, a higher interest rate is never a good thing.

This is the work of Republicans and their effort to bring this economy to its knees. This decision by Standard & Poors is a loss for America, but another win for Republicans.