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(Scared) Fitch Parrots Obama’s Debt Limit Claims

From CNN’s Money.com:

Fitch puts U.S. on notice for downgrade

By James O’Toole | October 15, 2013

NEW YORK (CNNMoney) – Rating agency Fitch put the U.S. on notice Tuesday for a possible downgrade, with lawmakers still struggling to resolve the debt ceiling crisis.

Fitch still has the U.S. rated AAA, the highest possible grade, but the country is now on "rating watch negative," meaning that there is increased possibility of a downgrade in the near future.

"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default," the agency said in a statement.

A Treasury Department spokesperson said the announcement "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy." …

It should, since Fitch only made this announcement to please the Obama, and to avoid being sued by his Department of (Social) Justice like S&P has been. (See below.)

Should the U.S. miss a debt payment, it would immediately be downgraded to "RD" — short for "restricted default" — until the situation is resolved. But the agency also indicated next steps hinge in part on what Congress does. One factor: How lawmakers finally decide to raise the limit, and for how long.

Fitch said it would "take into account the manner and duration of the agreement and the perceived risk of a similar episode occurring in the future." …

Just in case the hand of the Obama administration wasn’t already clear.

Some commentators, including rival ratings agency Moody’s, have speculated that the Treasury Department would prioritize debt payments even if the debt ceiling isn’t raised, preserving the country’s creditworthiness. But Fitch said Treasury "may be unable to prioritize debt service, and it is unclear whether it even has the legal authority to do so." …

More mendacity. The law requires the interest on the debt to be paid first. But, apparently, we are not alone in noticing that Fitch has Obama’s hand up their… er, back.

From the Daily Caller:

‘Why now?’ Fitch’s downgrade threat raises questions

By Brendan Bordelon | October 15, 2013

Could Fitch Ratings’ warning that it may downgrade the United States’ AAA credit rating due to the ongoing debt ceiling debate be politically motivated?

“My question is ‘Why now?’” John Berlau, an economist at the free market Competitive Enterprise Institute, told The Daily Caller News Foundation. “I just have that one statement by Fitch to go on, but no other credit rating agency seems to think the debt ceiling drama by itself merits a downgrade.” …

The statement by Fitch Ratings, released late Tuesday afternoon, gave highest priority to the political impasse in Washington, not runaway government spending or the structural debt.

Notice that Fitch isn’t complaining about the US borrowing another trillion dollars. Which is what the increased debt limit means under the Senate plan. — Shouldn’t they really be worried about that?

But Berlau explained that Fitch’s threat may be designed to avoid punishment from the Obama administration if future fiscal woes eventually force them to downgrade America’s credit rating.

In February, the Department of Justice filed a $5 billion lawsuit against Standard and Poor’s, the credit rating agency that first downgraded the U.S.’ credit rating in 2011. The DOJ alleged that the ratings agency purposefully gave deceptive ratings to toxic mortgage-backed securities, eventually precipitating the 2008 financial crisis.

But other ratings agencies, including industry giants Moody’s and Fitch, also overrated the same securities. “From some reason Moody’s and Fitch were left alone, even though they all gave mortgage-backed securities AAA ratings,” Berlau said.

Berlau also noted that Egan-Jones, a smaller ratings agency which also downgraded the United States credit rating in 2011 for federal overspending, was in an unprecedented move, barred from issuing ratings on certain bonds by the Securities and Exchange Commission.

“There’s a pattern of intimidation of credit rating agencies, both [bigger] and smaller ones,” he said. “There’s a pattern of prosecution of those that don’t toe the administration’s line and will hammer the administration on spending and debt.”

Oh come one. It’s just a coincidence.

Standard & Poor’s agrees, arguing in a September court filing that the Obama administration’s lawsuit was in retaliation for their credit rating downgrade two years ago. The ratings agency called the government’s action “impermissibly selective, punitive and meritless litigation.” …

So what? It worked. Fitch is now saying what Obama wants them to say.

This article was posted by Steve Gilbert on Wednesday, October 16th, 2013. Comments are currently closed.

One Response to “(Scared) Fitch Parrots Obama’s Debt Limit Claims”

  1. Obama and Fitch caught on camera ..

    http://goo.gl/BnMMbz




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