« | »

Credit Raters Demand US Increase Its Debt

From the economic gurus at the UK’s Financial Times:

Fitch adds voice to concerns over Washington debt

By James Politi in Washington
Published: June 8 2011

Fitch became the latest credit rating agency to warn the US to resolve its impasse on fiscal policy, saying failure to reach an agreement to raise the country’s borrowing limit would threaten its triple-A credit rating as well as global financial markets.

The note from Fitch follows a similar warning issued last week from Moody’s Investors Service, which said it would put the US on review for a possible downgrade if Congress and the White House did not strike a deal to increase America’s $14,300bn debt limit in the coming weeks. In April, Standard & Poor’s changed the outlook on the US credit score from “stable” to “negative”.

“Failure to raise the debt ceiling in a timely manner would imply a crisis of governance that could imperil the US’s triple-A status,” said David Riley, head of sovereign ratings at Fitch.

Granted we aren’t financial wizards, but doesn’t it seem a odd that credit rating agencies are insisting that the world’s biggest debtor increase its debt by raising its debt limit?

Would that work with your personal credit card? If you max out your Visa card, would the people who track your credit rating insist that you have to raise your limit? Somehow we don’t think so.

“More importantly, default by the world’s largest borrower and issuer of the pre-eminent reserve currency would be extraordinary and threaten the still fragile financial stability in the US and the world as a whole.”

The US is not going to default. There is no reason for it to default. There is plenty of revenue pouring into the US Treasury. It is enough to pay all of our bills with just a few minuscule cuts.

And if we do cut spending, not only would our economy benefit, but our credit worthiness would also go up. Which is something you would think Fitch and Moody’s and the rest would want.

The Fitch note outlined what would happen from a technical point of view if the debt limit was not raised by August 2, the deadline set by the Treasury beyond which it may no longer be in a position to pay its bills.

A big test would come on August 15, when the US is expected to honour $27bn of Treasury notes and $25bn of coupon payments on about $1,000bn of securities.

If those obligations could not be satisfied, the US would be on “restricted default” – which would be reversed once the payments were made. But the US would probably no longer retain triple-A status in the medium term, according to Fitch

This is a classic example of a canard. Again, there is no reason on earth why these notes would not be honored. We have the money. If there is any defaulting it would only be because the Obama administration wants to destroy our economy.

Which, come to think of it, could be a possibility after all. But it is not a necessity outcome of not raising the debt limit.

[T]he growing drumbeat of warnings from the rating agencies – as well as the recent weakness in the economic recovery – are prompting those involved in negotiations to try to speed up discussions, despite the deep political divisions that exist on budgetary matters

Make no mistake about it, these ‘credit services’ are in bed with the news media and the rest of the Democrat Party. Their top priority is to try to force the Republicans in Congress to cave on raising the debt ceiling so that the federal government can increase its spending in time for the 2012 elections.

This is just like after the first President Bush said, "read my lips, no new taxes." From then on the media spent every waking minute trying to find ways to make him increase taxes. We need to hold the line somewhere.

If not here, when? If not us, who?

From the economic gurus at the Financial Times:

Fitch adds voice to concerns over Washington debt

By James Politi in Washington
Published: June 8 2011

Fitch became the latest credit rating agency to warn the US to resolve its impasse on fiscal policy, saying failure to reach an agreement to raise the country’s borrowing limit would threaten its triple-A credit rating as well as global financial markets.

The note from Fitch follows a similar warning issued last week from Moody’s Investors Service, which said it would put the US on review for a possible downgrade if Congress and the White House did not strike a deal to increase America’s $14,300bn debt limit in the coming weeks. In April, Standard & Poor’s changed the outlook on the US credit score from “stable” to “negative”.

“Failure to raise the debt ceiling in a timely manner would imply a crisis of governance that could imperil the US’s triple-A status,” said David Riley, head of sovereign ratings at Fitch.

Granted we aren’t financial wizards, but doesn’t it seem a odd that credit rating agencies are insisting that the world’s biggest debtor increase its debt by raising its debt limit?

Would that work with your personal credit card? If you max out your Visa card, would the people who track your credit rating insist that you have to raise your limit? Somehow we don’t think so.

“More importantly, default by the world’s largest borrower and issuer of the pre-eminent reserve currency would be extraordinary and threaten the still fragile financial stability in the US and the world as a whole.”

The US is not going to default. There is no reason for it to default. There is plenty of revenue pouring into the US Treasury. It is enough to pay all of our bills with just a few minuscule cuts.

And if we do cut spending, not only would our economy benefit, but our credit worthiness would also go up. Which is something you would think Fitch and Moody’s and the rest would want.

The Fitch note outlined what would happen from a technical point of view if the debt limit was not raised by August 2, the deadline set by the Treasury beyond which it may no longer be in a position to pay its bills.

A big test would come on August 15, when the US is expected to honour $27bn of Treasury notes and $25bn of coupon payments on about $1,000bn of securities.

If those obligations could not be satisfied, the US would be on “restricted default” – which would be reversed once the payments were made. But the US would probably no longer retain triple-A status in the medium term, according to Fitch

This is a classic example of a canard. Again, there is no reason on earth why these notes would not be honored. We have the money. If there is any defaulting it would only be because the Obama administration wants to destroy our economy.

Which, come to think of it, could be a possibility after all. But it is not a necessity outcome of not raising the debt limit.

[T]he growing drumbeat of warnings from the rating agencies – as well as the recent weakness in the economic recovery – are prompting those involved in negotiations to try to speed up discussions, despite the deep political divisions that exist on budgetary matters

Make no mistake about it, these ‘credit services’ are in bed with the news media and the rest of the Democrat Party. Their top priority is to try to force the Republicans in Congress to cave on raising the debt ceiling so that the federal government can increase its spending in time for the 2012 elections.

This is just like after the first President Bush said, "read my lips, no new taxes." And how from then on the media spent every waking minute trying to find ways to make him increase taxes.

We need to hold the line somewhere. If not here, when? If not us, who?

This article was posted by Steve on Thursday, June 9th, 2011. Comments are currently closed.

4 Responses to “Credit Raters Demand US Increase Its Debt”

  1. Rusty Shackleford says:

    Socialists, they tend to paint faster when they get to the bottom of the can of paint, so they won’t run out as fast. Or, drive faster to get to the gas station. They are also well-known for checking for gas leaks with a lighted match.

    Two cowboys were leaning on a fence, talking and looking across the plains of Texas when a fella pulled up and got out of his big, black Lincoln. He had on a nicely tailored suit and very expensive shoes. On the side of the Lincoln was a magnetic sign that said “Federal Bureau of Land Management”.

    The cowboys weren’t all that impressed.

    The government functionary walked past the cowboys without so much as a smile and proceeded to open the gate in the fence and walk into the large pasture.

    “I wouldn’t do that if I was you”, said one cowboy.

    “It’s OK, I’m from the government, here’s my badge.”, as he produced a BLM official badge.

    The government man walked up over the rise in the field and then out of sight. The two cowboys stood there, just watching the spot where he disappeared and waited.

    About five minutes later, the government man came running over the rise at full speed, screaming that the bull was chasing him and to do something.

    The other cowboy said, “I’ve got an idea: Show him your badge!”

    Bureaucrats. They never change.

    • Right of the People says:

      Rusty,

      If only it were so simple. We could round up all the libtards and put them in that meadow and let the bulls take care of them. By the way, is this what they mean by a bull market?

  2. GetBackJack says:

    http://www.moneyweek.com/investments/stock-markets/the-great-credit-rating-scandal

    When the history of the credit bubble comes to be written, the list of guilty actors will be lengthy indeed: irresponsible banks, greedy borrowers, foolish speculators, incompetent regulators, the central bankers who kept rates too low for too long. Yet one group of players has been especially culpable in creating the current mess.

    The credit rating agencies have played a pivotal role in the global debt markets for over thirty years, with the stamp of approval from Moody’s, Standard and Poor’s or Fitch a prerequisite for the sale of a bond.

    How the credit rating agencies’ role has changed
    However in the last decade a whole new area of business opened up, one far more lucrative than the bread and butter business of analysing company balance sheets or government accounts. The boom in structured finance – best described as the repackaging, restructuring and resale of existing debts – placed the ratings agencies in a qualitatively different role. Instead of rating already extant bond issues, they became intimately involved in the issuance process itself, advising the investment bankers and their clients on how to obtain the necessary ratings for their new loans.

    The alchemy that led to more AAA ratings
    Then, by modelling the likely default rates, the bankers could present the new bonds to credit rating agencies and get their approval. Here, seduced by the fees that securitisation offered and turning a blind eye to the fact that the models were in many cases untested or based on only a few years of benign economic data, the raters were only too happy to grant AAA-ratings to the top (senior) tranches.

    read the whole thing

    Credit Ratings Agencies have figured out how to loot the Treasury.

  3. tranquil.night says:

    “Make no mistake about it, these ‘credit services’ are in bed with the news media and the rest of the Democrat Party. Their top priority is to try to force the Republicans in Congress to cave on raising the debt ceiling so that the federal government can increase its spending in time for the 2012 elections.”

    One man narrative-slayer.


« Front Page | To Top
« | »