Yikes, I'd hate to be in the accounting department at S&P the next few years. Can you say, "random IRS audit". Crazy to see the feds calling out a company like this in a blog post. Crazy times.
They deserve to be called out. This isn't their only mistake. These clowns are the same bunch who kept giving AAA scores to complex mortgage-backed securities during the housing boom.
Well, they were raked over the coals (though more should have been done) when they were too lenient. Now they're being too strict, and are still getting crap for it.
I'm not a big fan, but from a 'credit worthiness' standpoint, I'm not surprised the US was downgraded. With the sorts of people running the show, we demonstrated that we were cavalier enough to nearly get to a point where we couldn't pay our bills. And the rhetoric coming out of the Congress was serious enough to contribute to this.
Perhaps this is an oversimplification, but if I kept broadcasting to the all my creditors as well as experien, transunion and equifax that I might not pay my debts, eventually that might factor in to my credit score. If I kept announcing that I might not pay, and my credit score was lowered, I shouldn't be surprised.
"With the sorts of people running the show, we demonstrated that we were cavalier enough to nearly get to a point where we couldn't pay our bills."
s/couldn't/wouldn't
Our ability to pay our bills at present was never in question. The issue was whether we would merely decide not to pay. That induces a certain queasiness in the upper deck cabins on the ship of state.
My understanding is that we wouldn't be able to pay 100% of all our obligations pretty soon after that. Yes, we could pay bond holders, at the expense of other obligations. I may have been misinformed, but that was my takeaway.
By the same logic, why do all the other rating companies still give USA an AAA rating, when they shouldn't? Maybe S&P is the only one actually doing the right thing here, no matter how upset people get about it. Nobody likes to get downgraded. That doesn't mean it shouldn't happen if you're wasting your debt away.
The other 2 left the rating at AAA, but gave it a negative outlook. Which means that they anticipate better than even odds of a downgrade within a year or so.
