Entries Tagged as 'S&P'

The Downgrade’s Real Casualties

David Frum August 10th, 2011 at 8:04 am 19 Comments

Suzy Khimm at the Washington Post astutely identifies them: city governments. Which in turn means, order still more local austerity to come:

S&P’s is poised to downgrade thousands of municipal bonds that are directly tied to the federal government, look with an announcement expected later this week. In July, Moody’s recommended downgrading 7,000 muni bonds if the U.S. credit rating went down. While this secondary wave of downgrades is unlikely to shock the municipal bond market, it could reveal the vulnerable finances of some of the country’s more fiscally troubled towns and cities, ultimately putting them on shakier footing by making borrowing more expensive.

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The S&P Bond Rally

David Frum August 9th, 2011 at 9:18 am 42 Comments

In a column for the National Post, I explain why the current price of government bonds repudiates the S&P downgrade of American debt:

If I were Standard & Poor’s, I’d be damn embarrassed. On Friday, the famous bond-rating services took the momentous step of downgrading the sovereign debt of the United States of America, a country that has paid interest on its loans punctually since 1789. All weekend, the world awaited market reaction. On Monday, the markets did react: with an explosive rally in US Treasury bills.

Now that’s a repudiation.

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S&P Was Right to Downgrade

August 8th, 2011 at 4:34 pm 26 Comments

The dispute between the Treasury Department and Standard and Poor’s over America’s sovereign bond rating is a tempest in a teapot.  Worse, it overshadows the reality about America’s debt: Congress cannot handle it politically and Americans will have difficultly handling it personally.

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The Cost of the Crisis

David Frum July 28th, 2011 at 7:07 am 39 Comments

The forcing of a debt-ceiling crisis seems likely to have permanent consequences, patient even if it is settled before Default Day, healing reports Bloomberg News:

Conviction that lawmakers will fail sent rates on bills due next month to the highest level since March 31, data compiled by Bloomberg show.

“The politicians should learn from this that they shouldn’t wait until we have our backs against the wall,” Donald Selkin, New York-based chief market strategist at National Securities Corp., said in a telephone interview. Selkin, a 35-year Wall Street veteran, helps manage about $3 billion. “It’s very irresponsible because it can affect the economy and jobs. They’re putting us in a situation where we could have another financial meltdown.”

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Ratings Agencies Want to See Bush Tax Cuts Lapse

July 26th, 2011 at 11:58 pm 79 Comments

The suggestion that the US needs to cut $4 trillion in projected debt over the next ten years in order to avoid a downgrade in its debt rating, posed here in an S&P report, has gained significant traction among many on the right. Erick Erickson, when he’s not denying “absolution” to the falsely faithful in the GOP, has emphasized this cut of $4 trillion as crucial to avoid a downgrade.

However, digging into the S&P report reveals some details that might be more problematic for many seeming “deficit hawks.” Though this report does suggest that $4 trillion in cuts/increased revenue over the next ten years would be enough to keep an AAA rating, it also says that its baseline for savings assumes the expiration of the Bush tax cuts in 2012. Will many of these “deficit hawks” abandon those tax cuts in order to appease S&P and keep an AAA rating?

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