Obama Economic Advisor: S&P's Downgrade Was 'Reckless'

Andrew Harrer/Bloomberg via Getty Images(WASHINGTON) -- The public blame game over Standard & Poor’s downgrade of the United States’ credit rating continued to rage Monday.

It was an expensive day on Wall Street, as $2.3 trillion was lost in stock market wealth by the sound of the closing bell.  As President Obama addressed the nation for the first time since the downgrade was announced on Aug. 5, the Dow Jones industrial average dipped below the 11,000 mark.

In an exclusive interview with ABC's Nightline, Director of the National Economic Council Gene Sperling ripped apart the S&P’s report, calling it “irresponsible” and “reckless,” and claimed the rating agency rushed through its assessment.

“[S&P] simply changed their press release,” Sperling said.  “They simply decided on the spot that they had a different lead rationale for why they were going to downgrade the United States.  That was very irresponsible thing to do and a bit reckless to do at a moment of such fragility in the markets.”

That “fragility” certainly proved true on Monday, when S&P also announced it was downgrading the government-backed mortgage debt.  As a result, the stock market faced its biggest plunge since 2008.  The Dow closed down 634 points, the S&P 500 lost 79 points and the Nasdaq ended 174 points lower, dropping almost 7 percent.

Sperling said Obama’s economic team’s biggest worry was that the downgrade would have caused “very negative consequences” had the U.S. faced default.  Echoing the president’s remarks earlier Monday, Sperling urged the need for bipartisanship in the debt reduction deal later this year.

“We don’t agree that [S&P's] political analysis and certainly their flawed economic and budget analysis justify the downgrade in any way,” Sperling said.  “But we don’t disagree with what is a very obvious point too … that we need to be able to overcome the degree of line drawing, the degree of  my-way-or-the-highway that is keeping us as a country, as a government, from coming together on the type of bipartisan agreement we need right now to get our deficit down and on the right path.”

S&P continued to stand by its decision to downgrade the nation from an AAA credit rating to AA+, saying it based its decision on the nasty political fight between the Obama administration and Congress over raising the debt ceiling.

Copyright 2011 ABC News Radio

Aide: Senate Banking Committee "Looking into" S&P Downgrade

President Obama makes remarks about the S&P downgrade on Monday, August 8. ABC News(WASHINGTON) -- The Senate Banking Committee says its looking into Standard and Poor's downgrade of the U.S. credit rating, an aide has confirmed to ABC News.

However, the aide stressed the committee has yet to announce an official probe or investigation into last week's decision to strip the U.S. of its top-AAA rating amid debt and economic unrest in Washington.

According to the aide, the committee “is looking into the issue and gathering more information."

President Obama addressed S&P's decision to downgrade the country's credit rating Monday.

"No matter what some agency may say, we've always been and always will be a triple-A country," Obama said.

Obama said he hoped the unprecedented downgrade of U.S. debt -- right or wrong -- would instill a "renewed sense of urgency" in Republican and Democratic leaders who are tasked with reaching a $1.5 trillion deficit reduction plan before the end of the year.

Copyright 2011 ABC News Radio

Obama Spends Monday after Downgrade behind Closed Doors

Comstock/Thinkstock(WASHINGTON) -- President Obama will speak from the White House Monday afternoon about the economy and a bloody weekend in Afghanistan for U.S. troops. The speech was an unexpected addition to his schedule, which previously had him attending closed door meetings at the White House for most of the day, no doubt tackling the fallout from Standard & Poor’s decision Friday to downgrade the nation’s credit.

After spending a low-key weekend at Camp David, the only item on the president’s schedule this morning is his daily briefing in the Oval Office.

Tonight the president will attend two off-camera DNC fundraisers in Washington, D.C. Obama will speak at a private residence first, before heading to an event at the St. Regis Hotel.

Copyright 2011 ABC News Radio

S&P's Credibility Under Fire Amid US Debt Warning

Standard & Poor's Financial Services(WASHINGTON) -- Standard & Poor's sent shockwaves through Wall Street and Washington when it lowered its outlook on U.S. federal debt to "negative," but the credit-rating agency's own credibility has recently been called into question.

In fact, just last week a Senate investigations subcommittee ripped Standard & Poor's in a comprehensive report on the financial meltdown. The bipartisan report -- issued by Sen. Carl Levin, D-Mich., and Sen. Tom Coburn, R-Okla. -- in part blamed S&P for the crisis, saying the agency had inflated ratings on mortgage-backed securities for their own profit, only to later downgrade those ratings, destroying the value of the securities and contributing to the crisis.

In short, the senators say, "Inaccurate AAA credit ratings introduced risk into the U.S. financial system and constituted a key cause of the financial crisis."

The credibility of S&P is especially significant in the wake of the rating agency's statement on Monday that it was starting to lose faith in the government's creditworthiness. While S&P maintained its best-possible AAA rating for US federal debt, the firm lowered its outlook from "stable" to "negative." The statement means the agency now thinks there is a one-in-three chance that it will reduce the rating of the bonds in the next few years.

The S&P report quickly reverberated from Wall Street to Washington. On Monday major market indicators recorded their biggest one-day drop in more than a month. In Washington -- where a debate is raging on whether to raise the country's debt ceiling -- lawmakers pounced on the report for partisan gains.

The inability of Congress to rein in the nation's soaring deficits in recent years was at the heart of S&P's concerns. However, the agency did applaud new efforts from both sides of the aisle to tackle the country's long-term fiscal problems.

Copyright 2011 ABC News Radio

Rep. Levin: Ryan Budget 'Turns Back the Clock 50, 60 Years'

ABC News(WASHINGTON) -- The decision from Standard & Poor's on Monday to downgrade the outlook for U.S. debt amounted to a shot across Washington’s bow, a statement as much about politics as it is about economics.

The top Democrat on the House Ways and Means Committee said he hopes it will send a signal to Republicans that they can’t threaten not to raise the nation’s debt ceiling.

“I think it's very clear. Don't play games with the debt ceiling,” Rep. Sander Levin, D-Mich, told ABC News on Monday. “We have to act. We can't tie it to anything because if our credit goes bad, it has catastrophic implications. Look what happened to the stock market already. And if we continue to try and tread and try to combine it with other things we're really playing with fire. Don't do it. That's my message to the Republicans.”

Levin also attacked House Budget Chairman Paul Ryan’s budget, which was approved on a party-line vote in the House last week.

“The Ryan budget is irresponsible. It tries to turn back the clock on 50, 60 years of what made middle-income America in terms of health care, in terms of pensions,” Levin said. “And I think there's a deep divide. The president made it clear: Do we have one America or many Americas?”

“They say they're going to save Medicare. They should be honest. They want to do away with it.”

Copyright 2011 ABC News Radio

S&P Goes Negative On US Government Debt

Stephen Chernin/Getty Images(WASHINGTON) -- Standard & Poor’s, one of the major credit rating agencies, has changed its outlook for U.S. federal debt. The firm has kept the rating at AAA, but revised its outlook from stable to negative.

The report suggests the lack of any meaningful reform to the nation’s long-term fiscal problems two years after the financial crisis led the firm to reassess the risks inherent to investing in government bonds.

The stock market reacted negatively in early trading, shedding about two percent of its value.

Copyright 2011 ABC News Radio