S&P Downgrade Roils Markets, Worries Consumers

Monday, August 08, 2011

Traders work on the floor of the New York Stock Exchange. (Ramin Talaie/Getty)

Standard and Poor’s downgrade of the United States' credit rating on Friday, for the first time in history, brought condemnation from government officials, and fears of market turmoil. S&P's managing editor, John Chambers, told ABC News' "This Week" that there was a one in three chance of a further downgrade. He also said that the U.S. could regain its AAA rating, but warned that it may take as long as two decades — if it happens at all.

Mark Zandi, chief economist at Moody’s Analytics, and Louise Story, Wall Street and finance reporter for The New York Times, talk about what impact the downgrade will have on the U.S. economy.

Guests:

Louise Story and Mark Zandi

Produced by:

Duncan Wilson

Comments [11]

Angel from Miami, FL

Well, listener is leaving out 8 years or so of simultaneous war funding and tax breaks, dropping of financial restrictions that lead to risky mortgages and credit default swaps, and a budget surplus that vanished into thin air. But, hey, those bits of information get in the way of listener's obsession. It's too bad all that mental steam can't be harnessed for more productive endeavors.

Aug. 09 2011 11:30 AM
listener

Very correct Angel and if it is true Congress controls the purse strings now, it was true two years ago. The Republican Congress in 8 months did what the Democrat Congress didn't do in two years like pass a budget and submit serious proposals to deal with the debt while weathering ferocious defamation in the process. The Pelosi Congress spent more than all the other Congresses in history and this Congress is trying to reduce it despite the best efforts of the Senate and White House.

Aug. 08 2011 02:51 PM
Angel from Miami, FL

I don't know why "listener" is obsessed with the president. The budget of the US are in the hands of Congress. Members of congress can blame the president for a "lack of leadership" but it's the legislative branch that has set up the tentpoles in this media circus. And as usual there is no ringmaster.

Aug. 08 2011 01:26 PM
listener

The side show to this economic circus is to see far out on the credulity limb the media will go and the limits of their dishonest slight of hand over the next year supporting a President that they have so heavily invested in since 2008.

Aug. 08 2011 11:40 AM
Davis Straub from Oklahoma City, OK

As the market has shown S&P is incorrect. As history has shown S&P is incorrect. Why does anyone give them any credibility?

Aug. 08 2011 11:06 AM
Angel from Miami, FL

It's Kabuki theater! A game of congressional chicken. The two parties use it to get you scared into voting for one or the other so they can implement their grand financial plans of the future. But even if they dominate both houses, neither can cut social services or rollback corporate tax breaks. AARP and ExxonMobil pull the strings here. This mockumentary doesn't even mention the President in the end credits. It's a congressional show through and through.

Aug. 08 2011 10:04 AM
Bryan from Michigan

I seem to have read something very different from what everyone in the White House, Congress or pundit-land read. A big part of the downgrade decision was not about the numbers or the math -- it was about the perceived instability and unreliability of the US government, the government's inability or unwillingness to make predictable choices and decisions when faced with hard or complex problems. This unpredictability adds risk to investments, they said.

I've discarded all the "shoot the messenger" diatribes and imagined that this assessment was issued by some other source -- CBO, maybe, or some reputable economist think-tank. Does the assessment stand on its own? I think there isn't a lot they said that was either a surprise or unwarranted -- including the warning that it could drop again, if the "Gang of 12" blows up in November.

What does it say about us if the most widespread argument is not that S&P is wrong here but that they were wrong 5 years ago?

That part of this fiasco is particularly disturbing. The only "saving grace" is my assumption that everybody is just posturing. But that degrades the whole conversation, and suggests that words have no meaning. And that's a much, much bigger problem.

Aug. 08 2011 09:21 AM
Eliot from Brooklyn

It's not whether the United states could pay its debts -- we could, easily, if we chose. It's not even about whether for the next period of time the deficit will go up or down. It's about whether we're willing to pay the people we've already borrowed from what they are owed. What's alarming to debt-holders is not just that the government has difficulty reaching a decision on how to reduce the deficit. It's that a minority are willing, and able, to hold the bond-holders hostage, threatening not to pay them as if they were somehow to blame and deserved punishment. Why wasn't there a "clean" bill assuring that existing bonds and other government will be paid regardless of whether congress gets its act together over the future? Absent that, a ratings agency has to say "these debts might not be paid."

Aug. 08 2011 08:44 AM
Seth from New York, NY

So after much public debate and discussion, the US decided to pay back existing debts by borrowing additional money while providing only token gestures that it will make significant changes to the behaviors that fuel its deficit. Given this scenario, it is hard to imagine a responsible evaluator NOT lowering the county's credit rating.

Aug. 08 2011 08:33 AM
listener

So an arbitrary date like August 2 which coincidentally fell just in time for the President's birthday/fundraising push and summer vaycay was supposed to throw the nation into a panic over a default which was highly unlikely due to the debt ceiling crisis which could have been easily and quickly avoided by the Democrat leadership which could have raised it last December.
Now in the same week we are told the credit rating of the United States being downgraded for the first time in history is no biggie and if it is its all S&P's fault, or the Republican's fault or anybody except you know who.

Aug. 08 2011 08:11 AM
Tom White-Hassler from Prince Edward Island, Canada

I'm surprised anybody takes Standard and Poor's seriously after the way they and Moody's deceived investors about the true value of the basically junk mortgage packages being sliced 'n diced on Wall Street. The obvious conflict of interest then was that the evaluators (S&P, Moodys) were receiving handsome fees from the financial institutions requesting the evaluations. Should we be "following the money" on their downgrade of the U. S.?

Aug. 08 2011 07:26 AM

Leave a Comment

Email addresses are required but never displayed.