LePage Issues Statement on U.S. Credit Rating Downgrade, Despite S&P’s Own Credibility Issues

Posted on August 6, 2012. Filed under: Uncategorized | Tags: , , , |

Governor LePage’s office released the following press release minutes ago:

 


Governor LePage’s Statement on the U.S. Credit Rating Downgrade

For Immediate Release: Saturday, August 06, 2011Contact: Adrienne Bennett

The following statement from Governor Paul LePage was released Saturday morning from the Office of the Governor.

“It’s clear now, Congress and the White House antics over raising the nation’s $14.3 trillion borrowing limit has cost Americans. The U.S credit rating downgrade from AAA to AA+ will deeply affect our Nation in a way that we have not experienced since 1917.

The political posturing and last minute decision by Congress proves to be part of S&P’s downgrade. Using debt default as a bargaining chip rather than putting our fiscal house back in order was an enormously risky maneuver that failed. It is a major setback for our future and economic credibility of our Country and it’s time our leaders in Washington start working to get our economy back on track instead of worrying about upcoming elections.”

In addition, spokeswoman Adrienne Bennett offered:

“Maine has chosen to do the right thing in not taking on new debt and reducing our unfunded liability long-term. Maine has done exactly what S&P’s John Chambers said is what Washington should have done. We can take away a very valuable lesson from this downgrade decision, in that, it is important to not separate the budget process from debt authorization. In order to achieve fiscal stability we must examine both and acknowledge the impact they have on our State.”

This is very odd, considering that last night there was wide speculation what had occurred.

First, there were reports that the S&P’s decision to downgrade was based upon a $2 trillion dollar calculating error:

 

Standard & Poor’s decision to downgrade the U.S. credit rating was flawed by a $2 trillion error, according to a Treasury Department spokesman.S&P lowered the nation’s AAA grade one level to AA+ yesterday, after warning on July 14 that it would reduce the ranking in the absence of a “credible” plan to lower deficits even if the nation’s $14.3 trillion debt limit were lifted. The outlook was kept as “negative.”

The Treasury disagreed with S&P’s assessment because the analysis was carried out hastily, said a person familiar with the matter who declined to be identified because the discussions were private. The ratings firm erred in estimating discretionary spending levels at $2 trillion higher than Congressional Budget Office estimates, the person said.

The S&P decision went further than Moody’s Investors Service and Fitch Ratings, which affirmed their AAA credit ratings for the U.S. on Aug. 2, the day President Barack Obama signed a bill that ended the debt-ceiling impasse that pushed the country to the edge of default. Moody’s and Fitch both said that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens.

CNBC has this report which clearly states that Standard and Poor’s was aware of their $2 trillion dollar error BEFORE they made the final decision to downgrade, which only fuels speculation as to a motive for the unprecedented move:

 

Told they had a $2 trillion error in their calculation of US deficits over a 10-year period, Standard and Poor’s scrambled in the afternoon Friday to reconsider its historic decision to downgrade the United States government. Sources familiar with the situation say S&P had to rouse several of its European committee members from bed to hold an emergency conference call as markets headed toward their close in the US.The outcome: the agency affirmed the decision the committee had made just that morning, yanking its triple-A rating from the United States and downgrading it one notch to AA+.

The error and the time the ratings agency took to reconsider its downgrade are among the controversies surrounding the ultimate decision to downgrade the United States, which has held the agency’s top triple-A rating since 1941.

What is not at issue is that sometime in the early afternoon Friday, S&P informed the US Treasury that its committee had decided to downgrade US sovereign debt. Ratings agencies typically inform issuers of their decision before a press release is issued. But US officials quickly noticed an error in the agency’s calculations. This resulted in a change in the projected debt to GDP ratio. Instead of the 87 percent in 2021 miscalculated by S&P, it should have been 79 percent, a roughly $2 trillion mistake.

Neither side disputes the error.

Another thought is that the historic downgraded rating was a diversionary tactic away from their own culpability in the mortgage crisis. There is an excellent timeline within the linked piece with the following conclusion:

 

It’s becoming more and more obvious that Standard and Poor’s has a political agenda riding on the notion that the US is at risk of default on its debt based on some arbitrary limit to the debt-to-GDP ratio. There is no sound basis for that limit, or for S&P’s insistence on at least a $4 trillion down payment on debt reduction, any more than there is for the crackpot notion that a non-crazy US can be forced to default on its debt.Whatever S&P’s agenda, it has nothing to do with avoiding default risks or putting the US on sound fiscal footing. It appears to be intertwined with their attempts to absolve themselves from responsibility for their role in the 2008 financial crisis, and they are willing to manipulate not only the 2012 election but the world economy to escape the SEC’s attempts to regulate them.

It will be very interesting to see how/if Maine media decides to question the Governor and Bennett, as well as how either will respond.

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