Monday, August 08, 2011

S&P Downgrade - Retribution for Congressional Scrutiny?

Unless you live under a rock, you know about the credit downgrade by Standard and Poors of the US credit rating.  We dropped from AAA to AA+.  Not surprisingly they gave one reason which specifically blames the GOP.
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the [debt ceiling] act.
Now if you watch Fox News you will never see this quote, and though I do believe it was brought on mainly because of the insane debates over raising the debt ceiling I also thing it is a little pay-back from S&P.  They were hauled in before a Senate subcommittee a week prior to the downgrade for testimony in the mortgage crises.  During that hearing they were criticized for giving good ratings to the bundled mortgage products that caused the burst of the housing bubble.  I suspect their timing is as much retaliation as anything.  Time will tell.

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