Fed Says Go Screw Yourself S&P

Of course we're paraphrasing. Regardless, this is in essence what the Federal Reserve, the FDIC, the NCUA and the Comptroller of the Currency said, translated, in a joint press release, issued way into the night on a Friday.

Earlier today, Standard & Poor's rating agency lowered the long-term rating of the U.S. government and federal agencies from AAA to AA+. With regard to this action, the federal banking agencies are providing the following guidance to banks, savings associations, credit unions, and bank and savings and loan holding companies (collectively, banking organizations).

For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board's Regulation W, will also be unaffected.

Basically they are saying S&P, you will have no effect on the United States, our bonds or any other financial instrument and private sector associated with the United States.

CNN interviewed S&P about their downgrade decision in the video below. Notice the resolve as well as the nervousness in the voice. Who can argue that Congress is bouncing off the walls, but is that reason to downgrade the United States of America?



S&P managed to crash news servers on Friday night, get the Federal Reserve out of bed, cause the G7 ministers to meet, ensure Obama will lose re-election (according to Bloomberg), damage the reputation of Congress and wake up Paul Krugman to go write a blog post:

everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up...

My, my, what three little letters can do, oops scratch that, two and a plus. All hail the credit ratings agencies for seemingly they have more power than all of the nation-states around the globe.

Subject Meta: 

Forum Categories: 

amazing interview of S&P

Kudos to CNN for getting this on so fast. S&P seems to be making one very expensive statement on the United States political system.

S & P looked at Obamacare.

Everyone knows for profit medicine is breaking the bank. There is no room for corporate profit and dividends for share holders in the middle of death and disease. This is something government could do better.


The Empire Strikes Back

Good for Bernanke. He knows enough about S&P to realize their deficiencies.

To me, the most important issue is the impact on the rates that the federal and state governments pay to borrow. It looks like Bernanke is fighting this fight. He was also out front on the jobs issue in relation to the efforts of deficit hawks.

you know it's bad when....Bernanke looks like the good guy

Now you know why I have not been that slammin' on the Fed. I know everything thinks QE2 is bad news and I see their points, but at least Bernanke and others from the Fed are pointing to jobs being a crisis as well as income inequality, many points we made here...

so no comparison to our Government, Congress.

S&P Italy & W. Buffett

Interestingly, the man with significant responsibility for the US rating reduction cites specifically the problem as "entitlement". War and military budgets is not a problem for him. Another, example of the objectivity of the agency that gave 'sub-prime' mortgage holders a AAA rating.

Also, this week Italy's version of our Justice Dept. confiscated S&P's documents related to how they came to their conclusions about ratings.

Note, for anyone how believes these agencies are objective scientific institutions keep in mind that Warren Buffett's company is largest investor in Moody's and he reportedly made a bundle of money this week.

This is Theater of the Absurd and the masses of people are Waiting for Godot.

Who do you trust?

The exceptional shine has been tarnished since insider trading has been discovered at Berkshire Hathaway. Probably still an okay investment, but no institution can be trusted and certainly no individual. Not since A.P. Giannini.

It's all flash and dance.