Entries in Credit Rating (15)


S&P to Downgrade France's 'AAA' Credit Rating

Datacraft Co Ltd/Getty Images(PARIS) -- Standard & Poor’s downgraded France's credit rating Friday from AAA to AA+, French Finance Minister François Baroin confirmed.

Story developing...

Copyright 2012 ABC News Radio


Deal or No Deal, Downgrade from Moody’s Unlikely

Hemera/Thinkstock(WASHINGTON) -- With the members of the congressional supercommittee teetering on the cusp of failure, many are worried about the potential for a U.S. credit downgrade, but one Moody’s economist says that his firm is not likely to downgrade U.S. debt because it expected Congress to fail from the start.

“You know, it’s all relative to expectations and investor expectations with regard to the committee I think are -- have been and are still very, very low,” Moody’s economist Mark Zandi said on Fox News Sunday.

The committee has until Wednesday to complete and score a final deal, but last minute political posturing and blame games have led many to believe that Congress won’t meet the Thanksgiving deadline.  If that happens, Congress will have one year before supercommittee provisions kick in with $600 billion in automatic cuts from the Pentagon budget and 2 percent across-the-board cuts to Medicare providers’ payments.

Cuts of that magnitude would, in theory, calm the markets enough to prevent financial calamity.

“So this shouldn’t foster a downgrade or a run on the market or anything like that.  The $1.2 trillion in savings occurs one way or the other,” Republican Sen. Jon Kyl said on Meet the Press.

But Zandi also pointed to other looming Congressional deadlines, including an extension to unemployment benefits, a Medicare doctor payment fix, a patch to the alternative minimum tax and an extension to the payroll holiday, all of which would have a significant effect on the economy if Congress failed to act by the end of the year.

Copyright 2011 ABC News Radio


SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio


Downgrade Backlash Puts S&P Under Microscope

Scott Eells/Bloomberg via Getty Images(DETROIT) -- First, Standard & Poor's downgraded U.S. debt from AAA to AA+.  Now, critics in and out of government are returning fire -- downgrading the credit rating company rhetorically and perhaps soon putting it under a more official microscope.

Even as S&P issued new rating downgrades from AAA to AA+ against municipal entities backed by federal leases in Miami, Atlanta and Tacoma, Washington, according to Bloomberg, the Senate Banking Committee was looking at S&P, ABC News has learned.

A committee aide said the Democrat-controlled body "is looking into the issue and gathering more information" but emphasized that so far there was no official committee probe or investigation.

In Detroit Monday, as homeowners about to lose their houses to foreclosure tried to restructure their toxic mortgages once rated AAA by S&P, a populist backlash was forming against one of the most powerful economic voices in this country.

"What credibility does S&P have as a credit agency when they did such a terrible job?" asked Peter Lawler, a homeowner.

ABC News has received angry emails from the outraged, who've called the S&P downgrade "ridiculous," "unpatriotic," saying the company should be ashamed.

"Credits agencies are a scam," wrote Judy from Georgetown, Texas.

So who are these guys who make the decisions some Americans seem so angry about?

Standards & Poor's Rating Service has been grading corporate bonds for 90 years.  Today, it has 1,226 employees and does $75 million in business every year in more than 20 countries.

But Jules Kroll, one of its main critics, who started his own, smaller rating service, says S&P is not big enough to judge 100 countries because it has only about 100 actual analysts.

"Doing analysis of the economy of the United States and its likelihood of default is something that requires enormous resources that go far beyond the resources of S&P," Kroll said.

S&P missed the Enron crisis, giving the failed company high ratings until the day it went bankrupt.  In 2008, it gave a AAA rating to toxic waste mortgages.  Then, it gave an A rating to Lehman Brothers just before the investment bank went under.  It also failed to sound the warning about the serious economic troubles in Ireland, Spain and Greece.

Despite the anger at S&P, critics have argued that it is merely the messenger, and that the government is to blame for not getting its fiscal house in order sooner.

Copyright 2011 ABC News Radio


Along with Stocks, Crude Oil Prices Are Also in Freefall

Comstock Images/Thinkstock(WASHINGTON) -- Just two weeks ago, oil prices were headed upward, to more than $100 a barrel for crude.  But by the end of the day Monday, the price of oil was down to about $81 a barrel and could fall lower than that.

The downgrading of the U.S. credit rating by Standard & Poor's, fears of another recession and volatile world markets have sent oil prices plummeting.  Ironically, major forecasting agencies were predicting an upswing of prices due to global demand surpassing supplies.

In one sense, falling oil prices are bad because they reflect a world economy in crisis.  On the other hand, it might mean that motorists in the U.S. could soon be paying a lot less for gasoline, provided they have any money left to spend once Wall Street is done tanking.

Copyright 2011 ABC News Radio


Asian Markets Close Down After Downgrading of US Credit Rating

Hemera Technologies/Thinkstock(TOKYO) -- After opening the day down 1.4 percent and holding steady during morning trading, Tokyo's Nikkei stock market tumbled Monday afternoon, closing the day down 2.2 percent in its first day of trading since the United States' credit rating was downgraded for the first time in history last week.

The drop came even after G7 nations pledged to take measures to support financial stability and growth.

The news in other Asian markets was not so promising.  Hong Kong's Hang Seng plunged over three percent and South Korea's Kospi slipped 3.8 percent.

Australia's S&P/ASX-200 index also ended the day down 2.9 percent and indexes in New Zealand fell close to three percent.

The mixed reports likely won't do much to quell growing concerns that Standard & Poor's downgrade of the U.S. credit rating from AAA to AA+ could rock global financial markets.

There are efforts across the world to calm markets in light of the downgrading, which the White House has labeled "amateurish" and "breathtaking."

President Obama himself, however, has not spoken.  Returning from Camp David on Sunday, the president waved off reporters asking questions about the first downgrading ever of U.S. credit.

Even with the administration's heated criticism of S&P over the downgrading, the rating agency is not only standing by the decision, it is saying a further downgrade is possible if the United States doesn't solve its debt problem in two years.

The rating agency's managing director John Chambers said Sunday on ABC News' This Week with Christiane Amanpour that there's "at least a one in three chance of a downgrade over that period."

He has blamed the downgrade squarely on Washington politics, saying "this is not a serious way to run a country."

"Our job is to hold the mirror up to nature, and what we are telling investors is that we have a spectrum that runs from AAA to D," Chambers told ABC News.  "And what we're seeing is that the United States government is slightly less credit worthy."

The rating agency says Washington has shown an inability to reach political consensus, which was highlighted by the debate on the debt ceiling, and this leaves the U.S. "less stable, less effective."

Copyright 2011 ABC News Radio


S&P Downgrade: US Stocks Set to Open Sharply Lower

Comstock/Thinkstock(NEW YORK) -- Stocks are set to open sharply lower Monday morning in New York following Standard & Poor's first-ever downgrade of U.S. debt.

The Dow Jones Industrial Average was set to open down 220 points as of 7 a.m., according to futures trading indicators.

Markets in London, Paris, and Frankfurt were also trading lower Monday, with stocks off 1 percent to about 2.5 percent.  Markets were buoyed from a pledge by the European Central Bank to support shaky bonds in Italy and Spain.

In the U.S., investors are waiting and watching, hoping that the steep sell off last week will not continue.  Though government officials sought to find fault with S&P's assessment, pointing out that the agency had made a $2 trillion error in its math, others say rampant government spending led to the downgrade.

"If we were running our affairs properly we wouldn't have to worry about S&P, Moody's and Fitch...," Paul O'Neill, Treasury secretary in the Bush administration, told ABC News.

Since the late Friday announcement of S&P's downgrade of the U.S. credit rating there were efforts across the world to calm markets.  All weekend, the White House has been fighting in some very strong language, calling the move "amateurish" and "breathtaking."

President Obama has yet to speak on the matter.  Returning from Camp David on Sunday, the president waved off reporters asking questions about the first downgrading ever of U.S. credit.

Obama and his economic team spoke with leaders from around the world Sunday night, bracing for the impact from the move by S&P.

Copyright 2011 ABC News Radio


China Rating Agency Cuts US Credit Rating

ChinaFotoPress/Getty Images(BEIJING, China) -- China’s Dagong Global Crediting Co. has cut the U.S.’s credit rating one level from A+ to AA, the same as South Africa and Russia, blaming political wrangling between Republicans and Democrats for creating "worldwide panic."

Dagong cited “the negative role of the U.S. political system on the [global] economy,” adding that “this incident is a turning point in the further decline of the U.S. solvency.”

Dagong does not have the sort of clout as other ratings companies like Moody’s and Fitch, so the move is largely symbolic, but certainly it highlights China’s fear that all the slashing in spending -- and political wrangling -- in D.C. could slow the U.S. recovery, which in turn could negatively impact China’s dollar denominated investments.

Meanwhile, state-run news agency Xinhua ran another blistering editorial criticizing, “the madcap farce of brinkmanship [that] has disclosed yet another ticking bomb in the heartland of the sole superpower in the world -- the crippling tendency to politicize the economics while trivializing the politics.”

Separately, the governor of China’s central bank has also voiced concern about the state of the U.S. economy.

In a statement on the People’s Bank of China website, Zhou Xiaochuan wrote, "Big fluctuations and uncertainty in the U.S. treasury market will influence the stability of international monetary and financial systems, thus hurting the global economic recovery. We hope that the U.S. government and the Congress will take concrete and responsible policy properly deal with its debt issues, so as to ensure smooth operation of the Treasury market and investor safety."

Copyright 2011 ABC News Radio


Threat of Moody's Downgrade Forces States to Push Congress on Deal

Scott Eells/Bloomberg via Getty Images(WASHINGTON) -- After Moody’s Investor Service announced it was reviewing both Maryland and Virginia for a possible downgrade from their perfect AAA credit rating, the states’ governors have ratcheted up their rhetoric demanding Congress reach a deal and avoid default.

But with a Democrat to the north and a Republican to the south, Washington’s neighbors have starkly different messages for their comrades inside the Beltway.

Maryland Gov. Martin O'Malley, head of the Democratic Governors Association, blamed the brinksmanship on the “dinosaur wing of the Republican party led by Eric Cantor” which he said is threatening to “drive us needlessly into a default.”

Meanwhile the Republican governor of Virginia, Bob McDonnell, places the stalemate blame on the president.

“Your new programs and spending, and unfunded state mandates, have exacerbated the problem,” McDonnell wrote in a letter to President Obama last week. “Your failure to get the job done is hurting the businesses and citizens of our Commonwealth.”

Both Governors are facing a possible smear on their state’s finances after Moody’s announced Thursday that it was considering downgrading the AAA credit rating of 162 local governments, including 15 in Virginia and five in Maryland.

Moody’s cited the states’ high concentration of federal employees and dependence on federal contracts as two reasons for their possible credit downgrade.

Copyright 2011 ABC News Radio


Robert Reich: S&P Debt Warning is 'Height of Hubris'

Medioimages/Photodisc(WASHINGTON) -- It's the "height of hubris" for ratings agency Standard & Poor's to suggest it may cut the credit rating of the U.S. even if the debt crisis is solved, says Robert Reich, former labor secretary in the Clinton administration.

"No credit rating agency has gone as far as S&P," he told ABC News on Wednesday. "That's a highly political move. I'm surprised they are doing it."

Reich, who is a professor of public policy at the University of California, Berkeley and has also worked under Presidents Carter and Obama, called the credit rating agency's latest reports "irresponsible."

With just days to go until the Treasury estimates the U.S. could default on its sovereign debt, Reich said S&P has no business sharing its political opinions about U.S. economic policy. The U.S. currently has the highest AAA rating on its debt, which tops $14 trillion. A lower debt rating would mean higher borrowing costs for the U.S., adding billions more to the debt.

While ratings agencies testified Wednesday at a House financial services committee hearing on their role in the subprime mortgage market, Reich pointed out that Standard & Poor's contributed to the financial meltdown by giving AAA ratings to some of Wall Street's riskiest packages of mortgage-backed securities and collateralized debt obligations.

S&P's threat of a downgrade to the nation's credit rating goes one step further than Moody's and Fitch, the other two major credit rating agencies, by declaring even if Congress agrees to lift the $14.3 trillion debt limit, they and President Obama must also reduce the deficit by $4 trillion over 10 years.

In April, Standard & Poor's cut the U.S. ratings outlook to negative from stable and warned that its AAA rating is at risk unless lawmakers agree on a plan by 2013 to reduce the budget deficit and nation's debt.

On July 13, Moody's said it was reviewing the country's credit rating for a possible downgrade.

In one Standard & Poor's report on July 18, the agency stated it may lower the U.S. long-term rating "by one or more notches" into the "AA" category in the next three months if it concludes Congress and the White House "have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future."

On Wednesday, Fitch Ratings said U.S. treasuries would continue to be the "global benchmark security" in the long term because of the country's strong credit profile. Fitch's report said the $9.3 trillion in marketable U.S. Treasury securities is roughly five times the size of French ($1.9 trillion), UK ($1.8 trillion), and German ($1.6 trillion) government bond markets.

While there is no precedence for a downgrade on U.S. sovereign debt, Fitch said the most recent standard of comparison is Japan's downgrade to AA+ from AAA in September 1998, and in May, when Fitch gave Japan's current 'AA' rating a "Negative Outlook."

"Japanese government bond markets remain liquid despite losing AAA status, and the yen has retained its role as a major global currency," the report stated. David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, told ABC News that the coast is not clear for financial markets.

"Bond fund managers are as clueless as the House GOP," Stockman said. "Without significant tax increases, the Federal budget is a financial doomsday machine -- but now even Obama and the Senate Dems have given up on taxes. So in substance, the default has already happened -- it's just a matter of time before bondageddon actually happens."

Copyright 2011 ABC News Radio

ABC News Radio