“S&P is the world’s largest ratings agency. In most cases, its business model is based on charging the issuers of debt–private corporations, local and state governments, for instance–in exchange for a rating. The issuer then uses a positive rating to give investors confidence in the solidity of the investment. But S&P also rates the debt of 126 countries. And, like many of the countries whose debt is rated by S&P, the United States neither requests nor pays for its rating.”
They get their income from the companies they rate. Yeah, no incentive to shade the grades there…[/quote]
Even if S & P went ahead and did this as as an ethical and moral obligation to their clients (as they claim), the risk of post-downgrade fallout was tremendous. Even if their reasoning is sound, and within the parameters of their professional duty (which I seriously question), there was NO need to downgrade at this point in time. S & P supposedly follows a list of 5 considerations in grading, and they obviously did not do so. If they had, they could have only come to the conclusion that the likelihood of U.S. default in the foreseeable future is less than miniscule.
It’s apparent that they did not recognize the potential of repercussions of enormous international impact. Or they did recognize it, and chose to go ahead and downgrade anyway.
Either one is not a quality that I would include in my firm’s marketing materials.
Entrepreneurs, take heed. Business start-up opportunity in Aisle 6 (aka 55 Water Street, New York). Doesn’t require intellect, but believing your own bullshit is a must.
