The ‘not-so-super’ deficit commission is very unlikely to come up with a credible deficit-reduction plan. The committee is more divided than the overall Congress… The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence, we expect at least one credit downgrade in late November or early December when the supercommittee crashes.
Ethan Harris, economist for Bank of America Merril Lynch • Speaking on the looming possibility the U.S. could suffer another downgrade to their credit rating, this one in late November or early December. The last downgrade to the U.S. rating was not without controversy — one U.S. official called it a “a facts-be-damned decision,” over an accounting error by Standard and Poor’s that incorrectly inflated their deficit projections by nearly $2 trillion. Whatever might cause a credit downgrade, though, that it’s a dire consequence to be avoided is not in dispute, and rumblings are growing louder that the U.S. may end up biting this bullet again soon. source(via • follow)
In case you guys thought the downgrade-a-palooza was over … oh oh oh! You are mistaken, my friends. Fannie, Freddie, your massive sinkholes will feel the pain too, because S&P apparently wants to ensure we heard them the first time.
The U.S. Treasury’s response to the S&P downgrade.
Key line:“In a document provided to Treasury on Friday afternoon, Standard and Poor’s (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error – a basic math error of significant consequence – S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.”
The review of the U.S. government’s bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes. As such, there is a small but rising risk of a short-lived default.