S&P Downgrade of U.S. Credit Rating Smells Fishy

Two cats from S&P eye the bird of the U.S. after downgrading it. What will they do next? Photo credit: Cats n Nuthatch by d a murphy on flickr cc

Twisted Reasoning

Standard & Poors (S&P) said they wanted the U.S. to cut $4 Trillion from the deficit in order to possibly maintain their rating. So Who exactly does Standard & Poors represent and how do they make their money? In 2009 S&P had revenues of $2.61 billion dollars.

S&P was founded in 1860 and in 1966 was purchased by the McGraw-Hill Companies. The Chairman and President and CEO of the McGraw-Hill Companies is Harold W. (Terry) McGraw III.

Who decided that the S&P would be the arbiter of who is credit worthy? Are they biased in their decisions? Does their track record show they favor private organizations over public organizations? Should S&P be ignored? Is their credit rating a bunch of hot air to heat up the 2012 election and raise interest rates?

The S&P Connection to the American Bankers Association

Follow the connections and you will see that S&P has friends in private lending institutions through organizations like the American Bankers Association (ABA). This organization represents the banking industry and the “ABA lobbies to influence federal legislative and regulatory activities.”

According to the Wikipedia, the S&P 

“S&P has run the CUSIP Service Bureau, the only ISIN issuer in the United States, on behalf of the American Bankers Association. In its formal statement of objections, the European Commission alleges “that S&P is abusing this monopoly position by enforcing the payment of licence fees for the use of US ISINs by (a) banks and other financial services providers in the EEA and (b) information service providers in the EEA.” It claims that comparable agencies elsewhere in the world either do not charge fees at all, or do so on the basis of distribution cost, rather than usage.”

Facts reveal that Standard & Poors (S&P) math was off by $2 Trillion dollars in calculating the debt issue of the U.S. However, John Chambers, Chairman of Sovereign ratings at S&P, sidestepped the math errors of its organization when interviewed by the press.

Major Conflict of Interest Issues at S&P, Moodys & Fitch Ratings

According to Stephen Braun of the Associated Press in his article “Conflict of Interest at credit rating firms? Influence game: They wield power, lobby over regulation,” the three major credit rating companies spend

“hundreds of thousands of dollars to lobby the Obama administration and Congress over the way the government regulates them.”

These 3 credit rating firms rate the credit of private corporations and public organizations and entities.

Jane Hamsher and Scarecrow of FireDogLake (FDL) wrote an article hinting that S&P might deliberately be trying to manipulate the U.S. debt to escape liability for the mortgage crisis.

Credit Ratings Drive Capital

The dirty little secret about credit rating firms is that their credit ratings could serve as an excuse for banks and other lending institutions to justify changes in interest rates.

Case Study of How S&P Credit Ratings Affect Cities and States

According to Congressman Barney Frank, Standard & Poors “consistently overvalues private debt and consistently undervalues public debt.”

Consequences of S&P consistently undervaluing public debt

When S&P claims that public governments are more of a credit risk, this causes the tax payers to have to pay more to get services they need and want. One danger of S&P downgrading the U.S. credit rating could be increasing the debt because the U.S. would have to pay more to pay off its debt. That could cost taxpayers billions and billions of dollars.

Robert Reich points this out on his blog in his article, “Why S&P Has No Business Downgrading the U.S.”

Reich said in the above blog post:

“S&P’s intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P’s failures (along with the failures of the two other major credit-rating agencies — Fitch and Moody’s) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.”

Basically Standard & Poors is playing Russian Roulette with the American and World economy after they already helped tank it in 2007.

Why We Make Less $ Now Than in 1980

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2 Responses to S&P Downgrade of U.S. Credit Rating Smells Fishy

  1. Mark says:

    Great website – keep following the money – your analysis is spot on! Thank you!

    • kittyreporter says:

      Thanks Mark. Let’s hope we find out where the big smell is coming from so we can clean it up and keep our economy in the positive direction.

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