The Smell at S&P Seems to be Getting Stronger
S&P Downgraded the U.S. from AAA to AA+ on Friday, August 5th. Then on Monday, August 8th they downgraded Freddie Mac, Fannie Mae and various insurance and mortgage companies. However, they have not downgraded banks yet. Mmmmm.
John Chambers, Managing Director of S&P Sovereign Ratings Committee and major “decider” on downgrading U.S. credit rating, said on Bloomberg,
“Usually when you lose a AAA rating you don’t get it back right away. So there have been 5 governments that have gotten their AAA back, but it has taken between 9 and 18 years to do so.”
Mr. Chambers never directly answered the question of what the U.S. would have to do to get its AAA ratings back faster than 9 to 18 years other than to say there needed to be a compromise between the Republicans and Democrats which he then said he didn’t think could happen in six months. Does John Chambers relish his “sovereign” ratings power to appear to make or break countries?
Psychological Attack on America
Is S&P’s downgrade strategically timed to create an environment of fear and uncertainty to undermine the confidence of markets and all americans in order to force their political and economic will on the American public?
Is there a political motive behind Standard and Poor’s credit downgrades?
Today, the Senate Banking Committee announced it was considering investigating S&P. This sounds like an excellent idea, especially since the bailout of the banks beginning in 2008 from the mortgage-backed security scandal was largely due to S&P’s AAA ratings of junk bond like CDOs and other mortgage backed securities. Then the U.S. in the last days of the G. W. Bush administration decided to bail out the perpetrators of the sinking of the economy to prevent the black hole of a depression from overtaking the U.S. and possibly the world.
What is disturbing are concerted efforts to blame everything on President Obama. Perhaps the folks pointing their fingers need to look at a mirror to see the finger pointing back at them.
The rating system of S&P seems suspect to some sort of bias. The question is why do markets believe them and why do we allow them to have so much power? These folks deciding what is creditworthy seem to use flawed data and a flawed philosophy.
Barney Frank stated on Rachel Maddow of S&P:
“While they have been overvaluing private debt, they consistently undervalue public debt. These people have for years been giving cities and states and counties varying ratings, despite the fact the cities, states and towns almost never default.”
This is detrimental to public governments that raise money to improve their communities because if a state or county has a poor rating, they will have to pay a higher interest rate in order to accomplish their goals of raising capital to build roads, improve infrastructure or provide certain services.
Barney Frank claims the debt of the U.S. is primarily due to U.S. Military Spending. Frank urges Congress to cut military spending and put Americans back to work.
It is clear from S&P’s own analysis that much of their reasoning for downgrading various entities is subjective and not always based on the real numbers.
S&P Now Threatening Downgrade to Warren Buffet’s company Berkshire Hathaway
According to Marketplace of American Public Media, Warren Buffet said on CNBC :
“If anything, it may change my opinion on S&P.” — not his opinion of U.S. Treasuries.
Then a few hours later S&P put Berkshire Hathaway on “notice for a possible downgrade.” Is S&P flexing its credit rating sword to anyone who doesn’t like their ratings? Boy are they thin-skinned. Most bullies don’t react well to criticism.
Also, apparently “Berkshire Hathaway” is the “single biggest shareholders in S&P’s competitor, Moody’s.”
Lucky $1 Billion Bet or Insider Trading?
Who or what bet big money on July 21, 2011 that the U.S. would suffer a credit downgrade? According to this article, the person or entity placed $1 billion dollar bet that the U.S. credit rating would be downgraded and possibly now received $10 Billion dollars from that trade!
Is Manipulation of the Markets and World Economy Being Purposely Engineered?
Why would S&P purposely downgrade the U.S. credit rating at this time and then subsequently downgrade other entities that could shift the U.S. into another recession?
Questions about the Credit Downgrades from S&P:
1. Does S&P Benefit from the Downgrades in any way?
2. Was S&P told to downgrade the U.S. now for political and other reasons?
3. Is this a deliberate attempt to shift currency markets? Already investors are putting money into gold and European currency because of their fear from S&P’s raised eyebrows.
Averting Meltdown of the U.S. and World Economy
What can the U.S. do now to deal with S&P’s irresponsible actions that seem to be multiplying every day?