The Economist (August 13)
The Economist believes “Substandard & Poor” provides a useful wake up call for the U.S. S&P’s past is “flawed,” especially by the liberally dispensed ratings that led to the sub-prime crisis. Still, “the basic fact is that credit ratings are useful for investors: if the likes of S&P did not exist, the market would invent them.” Previously unthinkable, the threat of default should not be a bargaining chip. “This is not how an AAA-rated country behaves. S&P did America a favour by pointing this out.”
USA Today (August 7)
“The United States’ unquestioned AAA credit rating is gone, for the first time ever.” S&P’s downgrade was not a surprise, instead it “merely confirmed what anyone with their eyes open for the past decade or two already knew: The U.S. has a huge and growing debt problem that it is resolutely unwilling to solve.” USA Today points out one silver lining. The U.S. is not incapable of solving this problem, merely unwilling. Another silver lining is that two major agencies (Moody’s and Fitch) still assign the highest rating to U.S. debt, which continues to be highly sought by investors worldwide.
Financial Times (July 10)
Ratings agencies have come under considerable criticism since the Lehman crisis. Most recently, European leaders have heaped scorn on them after Moody’s downgraded Portugal to junk and S&P evaluated a proposal for a Greek debt rollover as a selective default. This time, the ratings agencies are addressing truths that are difficult to stomach. “We have to thank the rating agencies for giving the eurozone’s policymakers a clearer vision of which strategies are feasible, and which are not. It is now time to get serious.”
Time (June 16, 2011)
A year of austerity has left many Greeks nearly broke or unemployed, “and the debt-ridden country no better off.” Greece now has the ignominy of holding the world’s lowest debt rating, following S&P’s most recent downgrade on June 13. Athen’s Syntagma Square (Constitution Square) has become the daily scene of protests and riots. The government appears near dead, with neither major party able to offer leadership. It’s difficult “to see any clear champion for the millions of Greeks struggling to get by.”
A year of austerity has left many Greeks nearly broke or unemployed, “and the debt-ridden country no better off.” Greece now has the ignominy of holding the world’s lowest debt rating, following S&P’s most recent downgrade on June 13. Athen’s Syntagma Square (Constitution Square) has become the daily scene of protests and riots. The government appears near dead, with neither major party able to offer leadership. It’s difficult “to see any clear champion for the millions of Greeks struggling to get by.”
Tags: Debt, Downgrade, Government, Greece, S&P, Unemployment
Barron’s (April 23)
A U.S. debt downgrade is “likelier than not.” Rating agency Egan-Jones placed the U.S. on a negative watch over a month before S&P generated uproar with its lower outlook. Moreover, Egan-Jones Ratings has a better track record. It foresaw corporate problems that other agencies missed or ignored. The extent of the Egan-Jones action should be worrying for the federal government. “On March 1, Egan-Jones put the U.S. government’s triple-A rating on negative watch—a further step down the credit ladder from a negative outlook. It means a downgrade to double-A-plus is more likely than not.”
A U.S. debt downgrade is “likelier than not.” Rating agency Egan-Jones placed the U.S. on a negative watch over a month before S&P generated uproar with a lower outlook. Moreover, Egan-Jones Ratings has a better track record. It foresaw corporate problems that other agencies missed or ignored. The extent of the Egan-Jones action should be worrying for the federal government. “On March 1, Egan-Jones put the U.S. government’s triple-A rating on negative watch—a further step down the credit ladder from a negative outlook. It means a downgrade to double-A-plus is more likely than not.”
http://online.barrons.com/article/SB50001424052970203583604576271080879008522.html?mod=BOL_twm_mw
Tags: Credit, Egan Jones, Ratings agency, S&P, U.S.
New York Times (April 19)
S&P lowered the outlook for the credit rating of the United States. Credit rating agencies are suspect—anything they “say has to be taken with a block of salt.” Still, this latest move by S&P may be a good thing. The downgrade should focus the minds of the Government on determining a sustainable budget. While the ratings agencies “squandered their credibility” leading up to the sub-prime crisis, S&P did well this time in sending a powerful warning.S&P lowered the outlook for the credit rating of the United States. Credit rating agencies are suspect—anything they “say has to be taken with a block of salt.” Still, this latest move by S&P may be a good thing. The downgrade should focus the minds of the Government on determining a sustainable budget. While the ratings agencies “squandered their credibility” leading up to the sub-prime crisis, S&P did well this time in sending a powerful warning.
Tags: Budget, Ratings agencies, S&P, Sub-prime crisis, U.S.
Financial Times (January 27)
Japan is not facing the “dreadful dream” envisioned by Kaoru Yosano. Nor is S&P’s downgrade of Japan’s credit rating the next chapter in the global credit crisis. “Rather than a ‘dreadful dream’, Japan’s leaders face an enticing reality. They have the opportunity to issue more and more bonds at the lowest interest rates seen since the Babylonians invented accounting.”
New York Times (January 27)
Standard & Poor’s downgraded Japan’s debt from AA to AA-. No one is expecting an immediate crisis. Most of Japan’s debt is held domestically. Still the amount of debt is stupefying and there are troubling fundamentals. The Times writes, “The Japanese economy was tipped into a painful recession by the global financial crisis, and has only managed a very feeble recovery.” Deflation is jeopardizing this, as is “a rapidly aging population.” Japan’s greying population is also “raising the likelihood of ever-increasing social security and pension obligations.”
Standard & Poor’s downgraded Japan’s debt from AA to AA-. No one is expecting an immediate crisis. Most of Japan’s debt is held domestically. Still the amount of debt is stupefying and there are troubling fundamentals. The Times writes, “The Japanese economy was tipped into a painful recession by the global financial crisis, and has only managed a very feeble recovery.” Deflation is jeopardizing this, as is “a rapidly aging population.” Japan’s greying populaiton is also “raising the likelihood of ever-increasing social security and pension obligations.”
Wall Street Journal (May 14)
The WSJ hopes Nationally Recognized Statistical Ratings Organizations (NRSROs) will be eliminated. NRSROs include organizations such as S&P, Moody’s and Fitch which “put triple-A seals of approval on dubious securities at the heart of the financial panic.” In a promising development, a Senate amendment, which would eliminate NRSROs from U.S. laws and regulations, passed by 61-38.
The WSJ hopes Nationally Recognized Statistical Ratings Organizations (NRSROs) will be eliminated. NRSROs include organizations such as S&P, Moody’s and Fitch which “put triple-A seals of approval on dubious securities at the heart of the financial panic.” In a promising development, a Senate amendment, which would eliminate NRSROs from U.S. laws and regulations, passed by 61-38.
New York Times (May 2)
Lashing out at Wall Street Banks is now an American pastime, but the credit ratings agencies “bear as much responsibility for the financial crisis as the banks.” Largely forgotten is the role Moody’s, S&P and Fitch played. Investors and financial institutions would never have purchased as many mortgage-backed securities and collateralized debt obligations (CDO’s) had the raters properly warned investors that these were essentially “high-tech junk bonds,” rather than triple-A securities. Current proposals aimed at reforming the ratings agencies are not enough. The newspaper supports drastic steps to improve the ratings system.
Lashing out at Wall Street Banks is now an American pastime, but the credit ratings agencies “bear as much responsibility for the financial crisis as the banks.”
Largely forgotten is the role Moody’s, S&P and Fitch played. Investors and financial institutions would never have purchased as many mortgage-backed securities and collateralized debt obligations (CDO’s) had the raters properly warned investors that these were essentially “high-tech junk bonds,” rather than triple-A securities. Current proposals aimed at reforming the ratings agencies are not enough. The newspaper supports drastic steps to improve the ratings system.
Tags: Banks, CDOs, Fitch, MBS, Moody's, NRSROs, Ratings agencies, S&P, U.S., Wall Street
