By the way ABS is not a huge part of the AAA market.

I work for a very successful company; one of the reasons we are successful is because we realize that we can still screw up enough to go broke. If this S&P downgrade reminds us that the US can go broke, and we take action, then the downgrade is a good thing.

There is a lot of low hanging fruit when it comes to the budget. WE can cut military spending, we can cut farm subsidies, we can rationalize our health care system. On the revenue side, we can go to a $12,000 standard deduction, close loopholes like the mortgage interest deduction, simplify all our lives, and raise a lot of revenue.

Obama has been very good at getting elected, but he has been a weak leader. He deferred to the dems in congress on health care, and we got a weak bill. He still defers all the time. Bush was a much stronger leader, and could get Congress to comply with what he wanted. Unfortunately he was leading us in the wrong direction.

And when I look at the crop of Republicans running, I do not see a strong leader who will lead us in the right direction.

So maybe S&P is doing us a favor in firing this warning shot across our bow.

There is a reason why I “harp on this particular statistic” and that is because credit ratings are meant to be a measure of exactly one thing and that is the default rate. Contrary to what people seem to think it doesn’t measure anything else. Doesn’t mean “safe”, except in the technical sense that it will meant its contractual obligations. Most certainly does not mean that the price will not be volatile or you will not lose alot of money “investing” or trading it.

TonnyZ, I can see you are yet another one of these people who has difficulty reading. You made a very specific claim – ie that ratings agencies only very recently jumped on this band wagon within months. That claim is simply false and that was all the links I posted were meant to demonstrate. Spouting a load of other gibberish doesn’t make it any less false. Have fun arguing with what you apparently think i said and not what i actually said.

I don’t know, Danny_Black. If you elaborate on this, I would be interested in the answer. (Debt that was ORIGINALLY rated AAA that EVENTUALLY defaulted, I presume? Downgrading the debt a month before the default doesn’t fix the problem.)

I don’t care what percentage of AAA rated debt actually defaulted, because I know that billions of dollars of such paper ended up being worth pennies on the dollar at best. If you are arguing that the rating agencies didn’t rate billions of dollars as triple A only to have them lose almost all their value, then make the argument already, it would be wrong but you are allowed to try of course.

The percentage of all the paper rated as triple A which technically defaulted is irrelevant and could be highly misleading. Which presumably is why you harp on this particular statistic.

I pointed out that the very article you linked to stated the exact same points I made. Yes, you disagreed with me by linking to… an article that agrees with me completely. Thank you, you really are too kind. Who needs facts when I have this kind of competition?

Once again, the rating companies suddenly got worried about the US debt right after a Democrat took office. Before that, they made nary a peep about US debt, while Bush and Co. spent wildly, all on US credit.

Now, they have downgraded the US ostensibly because of the brinksmanship of the GOP. But, conveniently, downgrading the US will hurt the current administration more than the GOP.

Who exactly got “huge bonuses” at the rating agencies for “rating crap as triple A”? Also what percentage of AAA rated debt between 2001 and 2007 actually defaulted?

You might want to read the links you provide:

“Professor Peter Spencer, chief economic adviser to the highly regarded Ernst & Young Item Club, added: “They completely missed the financial crisis and are trying to regain some credibility. But at the end of the day, when the next problem occurs, they’ll be asleep at the wheel again.”

He said investors would most likely ignore S&P’s warnings.”

Further, I am unimpressed by a statement from S&P’s own website. You do know they have a pr department that is fully capable of getting whatever news they want right into the national newstream, right? A page on their website is weak sauce indeed.

They are playing the same game as all the GOP. The economy was great until Obama won the election. Unfunded wars, Medicare Plan D, unfunded tax cuts, pushing down interest rates to absurd levels to try and goose the economy for political gain, killing the M3 calculation (if memory serves) because it made the Bush Admin look bad, everything but everything was a-ok.

Then, suddenly, once Obama won, we developed serious economic problems. Oh, the seniors are getting older! Well where were they in 2007? Were the seniors not approaching retirement age then? Oh that’s right, S&P was busy rating complete crap as triple A and getting huge bonuses for doing it.

http://www.standardandpoors.com/ratings/ articles/en/us/?assetID=1245230849292

and there was mutterings about a US downgrade in 2009:

http://www.thisislondon.co.uk/standard-b usiness/article-23697332-oecd-attacks-sp -for-inexplicable-downgrade.do

But hey who cares about facts right?

I am TonnyZ! The website somehow managed to forget my email and registration completely, so I had to register again with a different handle.

I have a lot of respect for Felix, so I just feel confused about his statement. It seems so clueless, just as you say, about the behavior and performance of these companies (note I refuse to call them agencies, because they are for-profit companies) over the past decade.

I suspect it was a bit of a throw-away comment. Such is the nature of incessant blogging.

Also, did anyone notice that the ratings agencies all suddenly piped up at the same time, at the very end of the process, after months of this game going on, with the same sort of generalized complaint about how the US handles its finances? I don’t find their analysis to be objective, public-minded or indicative of any sound process.

They shouldn’t be used as evidence of anything here.

the rating agencies have enormously enjoyed their time in the spotlight and are no doubt amazed at how uncritically their “analyses” have been repeated by the media. A wonderful distraction from their performance 2001-2007.

I am amazed at your confidence in the honesty and competence of the rating companies. You refer to them as if they are no more harmless than our old auntie who refrains from criticizing us until she can’t hold her tongue any longer. Totally non-political actors, eh?

That is not the impression I have gotten about these companies at all.

To the extent that their ratings reflect political or other considerations rather than real monetary risk, aren’t we indirectly subsidizing investors who are *not* statutorily required to continue to rely on their “best judgement”?