S&P Officials Blame Downgrade On 'Degree Of Uncertainty' In Politics

WASHINGTON -- Ratings agency Standard and Poor's defended its decision to downgrade the United States credit rating, arguing on Sunday that the downgrade was justified by the brinkmanship and lack of certainty in Congress.

Standard and Poor's announced on Friday it was downgrading the United States from a AAA credit rating to AA+, the first time the government's credit rating has been downgraded. Another downgrade could occur if the United States does not begin to solve its debt problem, although it is not officially on watch, according to Standard and Poor's managing director John Chambers.

"If the fiscal position deteriorates further or the political gridlock remains entrenched, that could lead to [another] downgrade," Chambers said on ABC's "This Week."

David Beers, global head of sovereign ratings at Standard and Poor's, said on "Fox News Sunday" that the downgrade may not have "much of an impact" on global markets, and should not be pinned on either political party.

The agency was concerned with the "degree of uncertainty around the political policy process," Beers said. "The nature of the debate and the difficulty in framing a political consensus ... that was the key consideration."

Democrats have pushed back on the downgrade, pointing out that S&P overvalued sub-prime mortgages during the 2008 housing crisis. Sen. Bernie Sanders (I-Vt.) was critical of S&P and its decision to downgrade on Saturday, saying, "I find it interesting to see S&P so vigilant now in downgrading the U.S. credit rating. Where were they four years ago?"

The Obama administration argued the downgrade was partially due to what they called a $2 trillion "basic math error" in calculating future U.S. debt last week.

"The magnitude of their error combined with their willingness to simply change on the spot their lead rationale in their press release once the error was pointed out was breathtaking," White House economic adviser Gene Sperling said in a statement to USA Today.

But Beers defended the disputed $2 trillion, telling "Fox News Sunday" the figure for future debt reflects "highly technical assumptions" and arguing the administration's criticism was a "complete misrepresentation."

Despite the deal to raise the debt limit and cut government spending, "the underlying debt burden of the US is rising and will continue to rise over the next decade," he said.

Comments

[FrontierStrtGrp]

04:46 PM on 08/09/2011

For emerging markets, after a period of short-term volatility, it will be business as usual. China will complain loudly as the downgrade bolsters its case for more stringent debt management in the United States. These complaints will lack teeth, as China will need to maintain and add to its US Treasury portfolio to protect the asset from painful devaluation. A large sale of US government debt by China would be far more impactful to markets than the revised credit rating from S&P.

Other emerging markets stand to gain from this decision. They will lobby the ratings agencies for higher credit ratings based on improved debt management processes and lower debt ratios. The ratings agencies will have to react in favor of the emerging markets issuers, or risk losing their own credibility. In the years to come, the decision to downgrade the US (and possibly France, Germany, UK, Australia and other debt-laden markets) will benefit emerging markets as higher ratings will result in lower interest rates and more liquidity for them. Having access to capital markets on these terms will be one of the most important steps in graduating emerging markets to emerged markets.

[thalius]

10:28 AM on 08/09/2011

S&P base the downgrade on a” degree of uncertainty” but also on the majority of Republicans, holding this country hostage. Why isn’t this being report as well?
They will cut off their noses to spite their faces, and leave us all bloody. Great political strategy “there Butch”.

[conchop]

09:24 AM on 08/09/2011

UNCERTAINTY??? Lets see. S&P has 2 T$ in uncertain mathematics and still downgrades the USA credit?? And this costs investors and retirement accounts how much??? The TEA/GOP is certainly to blame and that is now a certain FACT.

The really big uncertainty is "us" and how much longer we will tolerate manufactured financial crisis's for TEA/GOP political gain and just what "we" will do now that "we've" been damaged. I want my money back!

[joeisright]

07:18 AM on 08/09/2011

We have totally flipped upside down and gone into the abyss of insanity. So when I personally go broke because I spend to much its my bosses fault for not paying me enough? Im stunned by the level of ignorance in the this country. TOTALLY STUNNED.

[Todd12345]

08:40 AM on 08/09/2011

hey go to your local bank and tell your loan officer. Im going to defaut , go in every week for three months - then ask him for a new loan and explain that you will not seek an new form of income to pay for it - EVER

[bart4u]

07:07 AM on 08/09/2011

Harold McGraw who owns the S

[Clevelandrocks246]

06:56 AM on 08/09/2011

In the report from S&P the following statement pretty much sums up the problem:

" We have changed our assumption on this because the majority of Republican­s in Congress continue to resist any measure that would raise revenues".

[elamatt]

09:18 PM on 08/08/2011

"Uncertainty" thy name is steeped tea...

[pwright433]

08:50 PM on 08/08/2011

And when has Socialism bailed out Capitalism?

You mean Germany bailing out Greece and Spain?

You mean the Us bailing out the Union socialism automakers. True capitalism would never have bailed out anyone. Capitalism says when a company is mismanaged or union demands have made it incapable of compitition then chapter 11 bankruptcy would resolve that and if that doesn't work then the company goes under and files chapter 7.

[freedomny]

08:11 PM on 08/08/2011

Hmmm - a Congress that most Americans think are corrupt? Two parties bickering like 3 year olds. A president that doesn't know how to negotiate. No REAL American Leaders? A global economy focused entirely on austerity. A financially un-educated minority who elected leaders who thinks it's ok not to compromise. A right wing side of Republicans who keeps yapping about government getting out of everyone's lives, but wants to put a camera in American's bedrooms? Hey...if I was living in England, China, Australia, etc, I would look at the US with dropped jaw.

And yes. We are in a global recession. And we will see another TBTF corporation fail. Let's just hope when it happens, they don't ask you and me to save them...yet again.

[donbrown]

04:21 AM on 08/09/2011

McConnell admitted the GOP held the economy hostage to achieve what they wanted,,, and that he planned to use the same tactic again, which could earn us a further downgrade.

Don't you get that?

[Todd12345]

08:12 AM on 08/09/2011

the repu blican platform is to destroy obama, They play chicken with the entire US economic position to do so - closet terroists , in fact cowardly closet terrorist , they dont even have the bravery to say it is so . except maybe mcconnel but I discount the turtle head because he may just e shortbus material and not smart enough to know better

[emigholzjr]

06:06 PM on 08/08/2011

If the Republican Party cannot be trusted to act in the best interest of the United States and or world. This downgrade was not to notify us it was to notify the rest of the world that we have alternative motives in establishing our policies. Like war for profit, perpetrated not by government but the greed of a few. Any corporation that profits in any way from war should be annexed into the US treasury untile full assets can be established.

[Todd12345]

08:18 AM on 08/09/2011

If tis idea where incorperated , it would be interesting to watch how chenney would have responded to afganistan and iraq. Excellent idea !

Might deserve some thought to add the energy pigs as a trigger in similar fashion should the country become crippled by economic conditions to control the pilaging while corrective action is employed . Of course half of congress right now is bent on default - they dont want to pay for what there spent during the bush years.

[fortressfountain]

12:52 PM on 08/08/2011

The uncertainity is no one knows what gov. is doing next year so they do not know how to shelther their assets.
Who is going to have a blind faith and believe what they say?

[Todd12345]

08:22 AM on 08/09/2011

there is no reason to belive the republicans will not terrorize the debt cieling again.

If i where the loan officer and I had just recived a month of letters from both husband and wife - one saying they where willing to get a second job to catch up on the loan , the other saying to default - I know what I would do!

[sixchair]

11:59 AM on 08/08/2011

You mean uncertainTEA?

[Siara]

11:48 AM on 08/08/2011

The S & P were very specific about where the problem lay. Page 4 of their rationale for downgradin­g us (published 8/5/11): ." We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise
revenues" It wasn't some vague bipartisan instability. Why the media cover up?

[sixchair]

11:59 AM on 08/08/2011

cuz Rush might go off on 'em. f'd.

[Siara]

12:03 PM on 08/08/2011

I wish that blowhard would have his inevitable coronary already

[Siara]

12:10 PM on 08/08/2011

the name Rush evoked a comment which was deleted

[toddag]

12:55 PM on 08/08/2011

Definitely under-reported.

[okiedemocrat]

08:57 AM on 08/08/2011

S&P sucks.

[Siara]

11:33 AM on 08/08/2011

No. Unfortunately it's our congress that sucks. Specifically the Tea Party. Talking tough isn't going to change the reality.

[Siara]

11:36 AM on 08/08/2011

This statement appears on page 4 of the S & P's rationale for downgrading us (published 8/5/11):

"We have changed our assumption on this because the majority
of Republicans in Congress continue to resist any measure that would raise
revenues"

Is there some bizarre reason this quote isn't being distributed by the media? Agree or disagree, they have stated precisely why they downgraded us and it wasn't just vague "instability"

[hotairlagoon]

12:31 AM on 08/09/2011

You are both right.

[Todd12345]

08:31 AM on 08/09/2011

they may suck , but it is the republicant party that has cuased the entire fiasco. This entire situation was set into motion by republicans . S& ps is right about the issue and platform that republicant will not allow new revenue . So expect more of the same teabgger agenda seeking default as the only recourse. Im not loaning that group money - not with that attitude

[jem6695]

08:37 AM on 08/08/2011

The S&P is playing politics just like everyone else--They didnt downgrade us in 2008 because it was BUSH in the white house-- If you didnt downgrade us when all that crap hit the fan then they should not now---we are in better more stable condition then we were in 2008--we were on the brink of complete melt down-- now we are not---It amazing that this JOHN CHAMBERS from S&P goes on (of all networks) FOX to tell the world that the dems or repulbicans are both to blame---THE RICHPUBLICANS ARE THE BLAME --PERIOD---LOOK WHAT RYAN SAID TO THE TEA PARTY MEMBERS IN JANUARY--- he said basically that -the raising the debt ceiling fight will be coming and that will be the moment to stand up--- AND THAT IS WHAT THEY DID---I hope the RICHPUBLICANS ARE HAPPY--they cost all AMERICANS WITH their NO GAME--and I mean NO GAME