Something to remember: Standard & Poor’s Triple A Ratings Collapse Again

[jpgray]

Two weeks ago, Standard & Poor’s put out a press release: The credit rating agency warned it was poised to downgrade almost 1,200 complex mortgage securities.

So what? Isn’t that dog-bites-man at this point?

Well, two-thirds of these mortgage bonds were rated only last year, long after the financial crisis. And S&P was supposed to have taken the distress of the housing crash and credit crisis into account when it assessed them. But in December, the ratings agency admitted that it had made methodological mistakes, including not understanding who would get interest payments when.

As everyone knows by now, the credit ratings agencies played an enormous role in creating the conditions that led to the financial crisis. Their willingness to slap Triple A ratings on all manner of Wall Street- engineered mortgage rot was enormously lucrative for the raters but a disaster for the global economy.

Unfortunately, as the episode in December shows, the credit ratings agencies are still struggling to get it right. These likely downgrades arose in a small corner of the market called “re-remics.” What you need to know about them is that they were do-overs. Wall Street took bonds that had collapsed (and which the agencies had mis-rated the first time) and re-bundled them again. Generally, the top half was rated Triple A, supposedly exceedingly safe.

The agencies rated billions of dollars worth of these bonds, mostly just in the last two years. With shocking rapidity, even some of those Triple As have defaulted.

Much more: http://www.propublica.org/thetrade/item/the-trade-credit-rating-agencies-standard-and-poors/

This is going to be played up for political theater value, and the GOP will crow incessantly about it. S&P is terrible about securities, but ratings agencies have never been much minded concerning sovereign debt. Prepare to watch the whole thing get blown out of proportion and all the false, lazy, irresponsible ratings of the very recent past become completely forgotten.

[Angry Dragon]

1. 'and the GOP will crow incessantly about it'

This downgrade is on the republican's heads .......
they got what they wanted in the debt deal and now it turns out it was not best for this country
blame the republicans .......... blame the republicans .......... blame the republicans

[Renew Deal]

2. If the "Grand Bargain" passed, the downgrade wouldn't have happened.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x1673961

[jpgray]

3. The grand bargain was also a terrible idea

We do not have a short term deficit crisis. We have a long term deficit crisis. At present, we have an employment crisis and are in a liquidity trap. Banks are hoarding trillions, because they don't see a good area in which to invest. Nobody is making up the lack, and austerity ensures even more money will be sucked out of the economy. Listening to S&P about what ought to happen or have happened is a mistake, in my view.

[mzmolly]

4. "I got 98% of what I wanted"

Let them crow. America knows who stood in the way of a 4T deal.

[jpgray]

5. No they don't.

They also didn't know that Obama didn't raise taxes in 2010.

[mzmolly]

6. Yes they do.

"Poll: 71% shun GOP handling of debt crisis"

http://www.cbsnews.com/8301-503544_162-20080250-503544.html

[jpgray]

7. Time will tell.

Obama proposed and Congress passed several measures that actually improved the economy prior to the 2010 elections. Due to the administration's inept messaging and refusal to acknowledge the fact that what passed was far too little, when the economy continued to stagnate the public turned to the GOP. Every single significant proposal from Obama these days, including entitlement reform, does not improve the economy. Rather than stagnate, the economy is in significant danger of dipping back into recession.

If Obama couldn't defend a record of positive policy in 2010, how is he to defend a record of actively harmful policy going into 2012? This assumes what is usual, that the GOP receives almost none of the blame it deserves.

[mzmolly]

10. Believe me I have concerns

about his re-election as well. I have no idea how he will maneuver out of the current mess. I was hoping for a bold jobs program. The S and P news, doesn't help accomplish that.

[jpgray]

11. What I don't get is the professed satisfaction with bipartisan deals

They're not a "win," and shouldn't be described as such. I'm unsure as to what benefit politically the administration thinks they gain from describing as desirable possibly necessary but certainly odious concessions. They were seen as odious by this very administration in its earlier rhetoric.

[mzmolly]

13. Who is satisfied? Seriously.

I'm not. I'm sure the White House isn't. But I understand the constitution enough to realize that we have no choice but to involve the House and Senate in passing legislation. The Republican/Tea Party has control of the house.

[WingDinger]

8. This is the reason why the Teafreaks WANTED a downgrade. see below

http://journals.democraticunderground.com/WingDinger/111

[jpgray]

9. I think the big push here is for entitlement reform

Which is a terrible idea, but it hasn't stopped everyone, from Obama to the Deficit Commission to Paul Ryan to S&P just now, from trumpeting it.

[kenny blankenship]

12. S&P's credit is no good. And with Bin Ladin dead, they just made Public Enemy No.1 in my book

Take them down, President Obama - or they will take YOU down, and us with you.

[Zenlitened]

14. S&P "admitted that it had made methodological mistakes"

Well at least this time, they only made a two TRILLION dollar math error.