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Standard & Poor’s Plays Politics

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People used to rely on Standard & Poor’s to follow the debt rating of stock, bonds, and other financial instruments. Since 2008, their credibility has been flushed down the toilet after the exposure of their role in giving the magic AAA rating to various questionable real estate products.

Today, Standard & Poor’s has managed to take one step further down the road to ignominy. Not only did they downgrade Ireland’s debt, but they downgraded the outlook on US debt citing the US government’s inability to come to terms with the budget by 2013.

Can these moves be seen as anything but a brash attempt to push the ideology of austerity on the United States and Europe? What is really disgusting is they are making these moves in relation to a problem they played a key role in making!

Wall Street would like nothing better than to see job growth stall and a probable victory by a Republican for president in 2012. Standard & Poor’s is playing by that script. The only question which remains is will the American people do what is right for the country, or what is right for Wall Street and Standard & Poor’s?

Standard & Poor’s isn’t practicing economics, it is practicing blatant extortion by threatening to hold hostage a jobs recovery for the ransom of an American austerity program.

It is simple politics, not economics.

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About Jerald Cumbus

  • hombre

    Supporting spending, deficits and government growth gets more unpleasant every day. We’re broke. You’re hate and denials can’t change that.

  • http://handyfilm.blogspot.com handyguy

    The S&P message was probably understated [why would they want to spook the markets?] and it was aimed at both sides: Grow up and find a compromise solution.

  • namenderkrieg

    “Playing politics”? No no no, comrade. You see, there is no “ideology of austerity.” It’s called living within your means. Fiscal conservatism forms the basis of civilized society. We responsible Americans will never hand over the reins of power to the barbarians at the gates.

    Shame on you for attacking S&P over their threatened downgrade of US debt, and over their downgrade of Irish debt. Not only are you attacking the messenger, but you are also promoting the reckless spending that created this recession.

  • http://rationalista.com Jerald Cumbus

    I stand by my argument. They issued the change in the rating in an attempt to change public policy. That is not economics, that is politics, pure and simple.

  • Cannonshop

    Seems like the same thing they would do to any corporate client to me. It would be playing politics to NOT change the debt-rating downward, given the U.S. record of payment and debt-to-income ratio.

  • Freud

    Read the credit rating provisions of the Dodd-Frank Act and get back to me about it being political. Sometimes a cigar is just a cigar.

  • http://rationalista.com Jerald Cumbus

    The Obama administration moved swiftly on Monday to downplay ratings agency S&P’s downgrade of its U.S. credit outlook, calling the decision a political judgment that should not be taken too seriously…

    Seems the administration read my draft.

  • Lorpius Prime

    Government credit ratings are political; they can’t be otherwise, because a government’s ability to pay off its loans depends on the politics driving its decisions. Your anger is misdirected: S&P isn’t issuing a message to the US government, it’s communicating with its clients considering lending money *to* to the US government. While US Treasury Bonds are probably still a safe bet (hence the AAA rating), the prospect of political deadlock over budget issues *is* a worry: you’d have to be pretty deep in denial not to acknowledge that.

    This sort of thing is simply the result of a public spending system that relies on private lending. You may not like that system, but don’t fault the people who play by its rules for doing their jobs.

  • Cannonshop

    #7 to retain some credibility, (and in defiance of the facts behind the decision), ANY administration facing such a ratings reduction would be pretty much REQUIRED to call down-play it and accuse S&P of playing politics…even if they aren’t. The Federal Reserve Note is backed mostly by belief, there’s no objective value to it, and admitting failure invites devaluation FURTHER.

  • Cannonshop

    There isn’t a deadbeat out there who didn’t swear, up-down-and-sideways that they’d pay back what they owe. admitting to ANY risk in a government loan (as in, loaning TO the government) is political suicide. Accepting S&P’s downgrading of Federal Debt would be catastrophically stupid-especially with elections coming up, military failure in Libya, and 188,000,000,000 dollars more to the debt just from the month of March alone. (which makes the rather paltry amount of spending reductions agreed to last week kind of like trying to fight a housefire with your spit.)

    S&P complied with the law. It makes certain parties in government look bad, that’s not a political act by S&P, that’s a political situation originating in D.C.

  • Peter

    Could one of you economic geniuses explain how the US deficit caused banks and investment firms to defraud their customers to the tune of trillions of dollars? You know, the real cause of the recession?

    Because that is exactly what you’re saying when you blame the current financial crisis on the US deficit.

    Letting the Bush era tax cuts expire would wipe out the deficit within six years. But no, we can’t think about taxing those poor poor people who earn over a quarter million per year. No, the poor dears would hardly know how to make ends meet on only $190K. Oh no we must have tax cuts.

    What do you do when a Democrat President presents you with a budget surplus? Do you do the conservative thing and use it to help pay down the debt? No! How dare those filthy commie Democrats suggest such a thing! We must wipe out that surplus on tax cuts for the rich!

    If you are lower or middle class and you are defending the wealth of the rich against taxes, then you’re a moron. If you make a quarter of a million dollars a year and your pissing and moaning about your tax burden, you can shut right up.

  • L

    Shame on Standard and Poor’s for taking a big part in the financial heist of the century.
    Of course only a fool or a thief would believe or defend them now.
    Ignore them and check with more reliable sources that do not have a criminally enabling record.

  • Cannonshop

    #11 Why is an Elephant? Because Oranges wear purple plaid vests!

    Oh, wait, this isn’t a non-sequiter contest?

    Okay, the law that required S&P to publish the credit data is an OUTCOME of the banking crisis that generated the recession, which was caused by a perfect storm of many parts, including regulatory interventions that encouraged bad bets, and a banking system that had become accustomed to the idea that Uncle Sam would magically make good their losses.

    are we following so far? good.

    Now, one of the unintended consequences of tightening regulations on financial reporting services, is that they’re no longer allowed to softball data. Uncle Sam is a deadbeat, who can’t pay his bills, and spends well in excess of his income. NOT reporting that fact, would be in violation of the CURRENT law, which was passed with an eye on financial institutions (to include the bond markets, stock markets, and surviving banks.)

    IOW, it’s an outcome I am almost dead certain the Pres and Congress did not intend. S&P isn’t rating the GDP of the United States, or the Recession, it’s rating the credit-worthiness of the UNITED STATES GOVERNMENT-which, by the required rules for doing those sort of ratings, probably got soft-balled anyway when you look at the debt-to-income ratio of said United States Government, accounting for financial liabilities, outstanding debt, debt and interest payments, assets, liquid assets, and the other myriad factors that go into assessing the value of bonds issued by, say, a corporate entity such as the Boeing Company or Microsoft.

    as I said before, it would be playing electoral politics to CONCEAL this condition.

  • Fred

    The OJ jury and Washington’s tea party freshman systems can break down