"Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," the agency said in a statement.(link)
Anyone who is not alarmed, is not paying attention.
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Let's all go back over what contributed to the financial meltdown again.
ReplyDeleteBankers decided to sell mortgages as securities. To spread the risk, they carved them up into separate "tranches".
The mortgages they packaged up were high-risk, toxic loans to people who never had even a small itty-bitty chance of repaying them.
Yet, agencies like Standard & Poor's and Moody's gave these bonds triple-A ratings, along with the brokerage houses who sold them.
The house fell down. Rating agencies shrugged and said "Huh, I guess we were wrong."
Moody's Corp and Standard and Poor's triggered the worst financial crisis in decades when they were forced to downgrade the inflated ratings they slapped on complex mortgage-backed securities, a U.S. congressional report concluded on Wednesday.
In one of the most stark condemnations of the credit rating agencies, a Senate investigations panel said the agencies continued to give top ratings to mortgage-backed securities months after the housing market started to collapse.
The agencies then unleashed on the financial system a flood of downgrades in July 2007, the panel said.
"Perhaps more than any other single event, the sudden mass downgrades of (residential mortgage-backed securities) and (collateralized debt obligation) ratings were the immediate trigger for the financial crisis," the staff for Senators Carl Levin and Tom Coburn wrote in their report.
So, should we really give a shit what Standard and Poor's says?
Let's hope that this serves as an external pressure on Obama and the Democrats to act seriously about the federal budget and cut spending. Maybe, hopefully they will realize that this is more than a little political game....
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