10 Questions About S&P Downgrade

The downgrade from TripleAAA to AA+ by Standard & Poors raises many questions. Here is my list of most important issues the downgrade raises:

1. The change in trajectory of US debt was in service of Banks: It began with TARP, and continued with every other bailout/stimulus/economic plan. What was S&P’s role in creating that crisis?

2. How will non-US investors (Private and Central Banks) view the downgrade?

3. What is S&P’s methodology of rating sovereigns beyond Probability of Default? How does this differ from other rating agencies?

4. What does the downgrade do to US currency — is that the true impact of the credit downgrade?

5. Will borrowing costs likely increase for the US? What about consumers?

6.  Will the downgrade of US spill over to other agencies, states, municipalities?

7. Will private sector holders of US Treasuries — insurers, pension, foundations, etc. — be downgraded as well?

8. Why did the rating agency not wait until the special committee / debt ceiling deal was completed later this year?

9. The Rating Agencies were downgraded by Dodd-Frank, with all regulatory and legal references to be removed. Was S&P’s move retaliatory?

10. How will US markets open on Monday in response to the downgrade?

Thanks to Josh Rosner, Scott Frew, and other anonymous participants . . .

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