Just some thoughts in my head about the company...
Just thought I'd point out that S&P had mortgage-backed securities from Lehman Brothers and other banks rated triple A right up to the night that particular bank house of cards imploded.
Also wanted to point out that when S&P lowered our nation's rating they justified it with a report that turned out to have a two trillion dollar math mistake. When S&P finally figured out their error they quickly changed their justification to a political one.
One wonders if S&P's actions are more about some sort of payback for the coal-raking they received from the government after their mortgage-backed securities debacle...
Also, one wonders if we really want a company with such a poor track record as S&P trying to tell us how to run things...
You don't buy into the S&P ratings, I don't buy into the S&P ratings.
Unfortunately we are a very very small minority, and just tiny drops in a sea of crazy.
Nothing we say or do can change the way they do this.
Yes I think it's all political bs, and yes I think the ratings change was just a scare tactic. I also know that I can never do anything to change this.
So, you are in agreement that the rating drop and perhaps as well, the dowgrade by the other rating agencies in the long term outlook was not warranted on the basis of............what?
IMO, Considering, that at least 1 foriegn ratings agency had already dropped the raing of our long term debt, and at least one smaller ratings company here in the US had done the same, and considering that the plan signed on to by congress and Whitehouse no where near addressed our federal financial and economic problems, I would say that the rating drop was more than warranted on exactly the basis as spelled out gy S&P over the weekend, and if there were a political side to it, I believe it was the frantic pressure from Washington in a pre election year aimed at Fitch and Moody NOT to do as they had both threatened to do. That pressure from both congressional members, Sec Tresury Geithner,(an old Wall St guy himself) and the White House was widely reported on and is no secret at all. Today's warning from Moody's that they may indeed follow suit before 2013 and also lower the rating if significanly larger defict reductions don't come on line is no idle threat either. IMO, the debt rating has long been rated much higher than it should be and should certainly not be any higher than an A+ at this stage of things, and I am perfectly willing to take my lumps in the market if this downgrade produces a real move by govt to make real deficit cuts and revenue (tax) changes to address the longterm situation.
S&P assumed that government spending would grow based on GDP growth, not the (empty) promise that Congress and President made to only grow the budget according to inflation long after they are out of office.
I believe that future Congresses and Presidents are more likely to spend the money rather than use it to pay down the debt.
Originally posted by JazzMan: One wonders if S&P's actions are more about some sort of payback for the coal-raking they received from the government after their mortgage-backed securities debacle...
If I was in the business of ranking credit, if I forewarned the United States, and if I got raked over the coals for giving an honest opinion, I would not change my mind because I got raked over the coals. Conditions were set before hand. I would be more inclined to lower the rating if I were scolded as that demonstrates irresponsibility. Now, in case anyone missed it, S&P reasoned that new revenue was not obtained. Did Nobama put them up to it to help make his case for tax hikes ? Me thinks the credit rating needed to be down graded and has been needed for some time. The good news it it will give pause to never ending borrowing.
If S&P had done their job in the years leading up to the mortgage meltdown there likely wouldn't have have been a mortgage meltdown. Why not? Because a realistic rating near the bottom of the scale for all the high-risk mortgage-based securities would have been considered a sucker bet by most people around the world. In turn, lenders wouldn't have been falling all over each other trying to create new mortgages (including very high-risk) just so they could packed them up into securities to sell off to suckers. What drove the lending frenzy of the 2000's was the desire to get money lended in order to make those securities. That's why the lenders looked the other way when folks who really shouldn't have been borrowing were buying.
If you were a bank in the 2000's that needed mortgages to bundle into securities, you didn't look close at your clients, especially in light of the fact that the mortgages (and risks) were going to be sold off to some mark just about as fast as they were created.
Except the politicians who were screaming for banks and other lenders to make home loans available to just about everyone back then, would have screamed bloody murder or even racism about the whole thing. The big 3 debt rating agencies are paid for their info by the issuers of the debt, including by the issuer of the federal debt--pretty much a conflict of interest to me (no pun intended). Egan Jones and Kroll agencies are paid by the purchasers of the debt, which to me, sounds a lot less corruptable. Egan Jones also downgraded the long term US debt sometime back in the early debate about debt ceiling, but since they are a smaller entity, the MSM never picked up on it much.
If I had to pick one that was honest and non-corruptable, it would be Kroll.
IP: Logged
07:09 PM
82-T/A [At Work] Member
Posts: 24109 From: Florida USA Registered: Aug 2002
Just some thoughts in my head about the company...
Just thought I'd point out that S&P had mortgage-backed securities from Lehman Brothers and other banks rated triple A right up to the night that particular bank house of cards imploded.
Also wanted to point out that when S&P lowered our nation's rating they justified it with a report that turned out to have a two trillion dollar math mistake. When S&P finally figured out their error they quickly changed their justification to a political one.
One wonders if S&P's actions are more about some sort of payback for the coal-raking they received from the government after their mortgage-backed securities debacle...
Also, one wonders if we really want a company with such a poor track record as S&P trying to tell us how to run things...
I agree with everything you said, but under no circumstance was the justification "political." That was neither implied, or suggested... that is opinion.
On the other hand however... what IS a AAA rating? I do personally feel that our rating is still better than France's, or any other country in this world for that matter... but again, what exactly is a AAA rating?
If you have a class, and the highest grade is a "D", does that mean that kid is an excellent student? He might very well be the smartest kid in class, but that doesn't mean he's a good student, it just means everyone else is worse than he is.
The United States is a far cry from what it was in 1997-1998. THAT... was a deserved AAA rating. I love America with every fiber of my being, but we haven't been a AAA rated country since ~2003-2004.
I honestly think, in my opinion, that we are more like an A+... not a AA, and not an AA+. I think everyone else should be rated worse than us.
Australia and Canada have more solvent economies than we do right now... less debt to GDP ratio and a higher valued currency. What would you consider them?
When we have a GDP growth of 5% with acceptable inflation and acceptable unemployment, then I'll agree we deserve an AAA rating. Regarding our debt and personal debt, no one, and I mean absolutely no one knows the borrowers ability to repay better than the borrower. Due dilligence is their own responsibility--always. Yet, we never hear about those who ended up with these sliced and diced mortgages and sub prime loans--or those who borrowed in the first place and in most cases that the purchasers of those products (the pension funds, endowments, etc.) should have done much more of their own "due diligence", rather than relying blindly on the ratings. After all, the purchasers were hardly "rube" retail investors lacking the knowledge to perform such due diligence. Why? Because it's not politically expedient or fasionable to actually place the blame on the borrower or on the buyer of the paper, even tho absolutely no one forced them to buy these Brooklyn Bridges but themselves. If I believed every prospectus I got in the mail, I'd be up to my neck in bad investments--even before the bottom of the market dropped out. The same holds true for the buyer of any product
IP: Logged
08:15 PM
Aug 9th, 2011
Gridlock Member
Posts: 2874 From: New Westminster, BC Canada Registered: Apr 2002
Australia and Canada have more solvent economies than we do right now... less debt to GDP ratio and a higher valued currency. What would you consider them?
This isn't blind patriotism, because I'm not a blind patriot.
We're AAA. and we deserve it.
Back in the 90's, our politicians made some very tough choices. Took out the manufacturers tax and introduced a value added tax. We started to pay down debt. In fact, we were doing quite well on that front until the recession of 2008. I hope we return to balanced books very quickly, and return to paying off debt just as fast. It became a national priority.
But that's not the cool part.
The cool part is, we didn't tank in 2008. We entered a recession and dealt with it, but our banks didn't implode, and our housing prices didn't plummet-they dropped. We had some projects lose funding, and Vancouver is the proud owner of a condo development used in the Olympics that wasn't part of the original plan, but we made it through.
We still valued and appreciated being America's largest trading partner, and in return them being ours, but we invested in foreign trade missions to open new markets. Trade to china that was non-existent 20 years ago is now huge.
What started it all? We were downgraded to AA+ in 1993. Regained it 9 years later.
This needs to be a rallying cry to tell republicans and democrats to stop trying to win the next election, and do their jobs today.
IP: Logged
01:40 AM
Gridlock Member
Posts: 2874 From: New Westminster, BC Canada Registered: Apr 2002
This isn't blind patriotism, because I'm not a blind patriot.
We're AAA. and we deserve it.
Back in the 90's, our politicians made some very tough choices. Took out the manufacturers tax and introduced a value added tax. We started to pay down debt. In fact, we were doing quite well on that front until the recession of 2008. I hope we return to balanced books very quickly, and return to paying off debt just as fast. It became a national priority.
But that's not the cool part.
The cool part is, we didn't tank in 2008. We entered a recession and dealt with it, but our banks didn't implode, and our housing prices didn't plummet-they dropped. We had some projects lose funding, and Vancouver is the proud owner of a condo development used in the Olympics that wasn't part of the original plan, but we made it through.
We still valued and appreciated being America's largest trading partner, and in return them being ours, but we invested in foreign trade missions to open new markets. Trade to china that was non-existent 20 years ago is now huge.
What started it all? We were downgraded to AA+ in 1993. Regained it 9 years later.
This needs to be a rallying cry to tell republicans and democrats to stop trying to win the next election, and do their jobs today.
In fact, and I don't know if the president can do this, but I would have liked him to send a bill to the floor for a vote and tell us about that today in his press conference.
"I'm sending executive bill 01 to the floor by friday showing 4 trillion in cuts and 10% increase in taxes. The republicans can shoot it down if they want." Then they can say, dude, we tried.
As in actually do something instead of sitting there blaming.
(sounds like a perfect justification for term limit overhaul as well)
But, there's a LOT of difference in Canada and the US, most importantly in the size of the GDP needed to support America even in a lengthy time of peace and prosperity. And we are no longer like Canadians, We are no longer resilient and by no means are we--as a people--self reliant. We dont WANT to pull up our bootstraps and get to work on our problems, we want the "good life" to which we have become accustomed (the good ol days) and we want someone else, everybody else, anybody else but ourselves to pay for them. We're special--we aren't supposed to do without or sacrifice. We're Americans, and every one of us is supposed to have a nice 3 bdr house with a picket fence, and every succeeding generation is supposed to do a little better than the preceeding one, till we are--every single one of us--kings in our own palaces. It's our birthright! isn't it?
(I'm only 1/2 joking--there are a ton of people here who believe exactly that way)
(but Congrats Canada--you did it right!!)
But we can't, simply because we won't. Of every federal dollar we spend, we have to borrow 40 cents of it. It will rise, according to the CBO, to 50 cents before 2016. Try that sometime. When you are checking out at the supermarket, every time $1 is rung up, turn to the person in line behind you and ask to borrow 40 cents--every time. On the way home, when you're putting $50 in your gas tank, walk over to the guy in the next fuel lane and ask to borrow $20. Seriously--try it, and you'll get an idea just how ridiculuos we've become, yet again, there are tons of everyday citizens who see absolutely nothing wrong with this, will shrug their shoulders and just say--kick it on down the road.
When I get to really thinking about it, I am really quite ashamed of this nation.
My lack of faith in the S&P rating is based on it being a "guess" based on their research. I'm certain that there is math involved, and other difficult formulas that I will never comprehend.
BUT.
In the end it's still guesses, gut feelings, and just numbers on a sheet.
My lack of faith in the S&P rating is based on it being a "guess" based on their research. I'm certain that there is math involved, and other difficult formulas that I will never comprehend.
BUT.
In the end it's still guesses, gut feelings, and just numbers on a sheet.
