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Moody's Puts US AAA Rating On Downgrade Review
Moody's Places US Aaa Government Bond Rating and Related
Ratings on Review for Possible Downgrade
New York, July 13, 2011 -- Moody's Investors Service has
placed the Aaa bond rating of the government of the United States on review for
possible downgrade given the rising possibility that the statutory debt limit
will not be raised on a timely basis, leading to a default on US Treasury debt
obligations. On June 2, Moody's had announced that a rating review would be
likely in mid July unless there was meaningful progress in negotiations to
raise the debt limit.
In conjunction with this action, Moody's has placed on
review for possible downgrade the Aaa ratings of financial institutions
directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home
Loan Banks, and the Federal Farm Credit Banks. We have also placed on review
for possible downgrade securities either guaranteed by, backed by collateral
securities issued by, or otherwise directly linked to the US government or the
affected financial institutions.
RATIONALE FOR REVIEW
The review of the US 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.
Moody's considers the probability of a default on
interest payments to be low but no longer to be de minimis. An actual default,
regardless of duration, would fundamentally alter Moody's assessment of the
timeliness of future payments, and a Aaa rating would likely no longer be
appropriate. However, because this type of default is expected to be
short-lived, and the expected loss to holders of Treasury bonds would be
minimal or non-existent, the rating would most likely be downgraded to
somewhere in the Aa range.
The specific rating that would be assigned at the
conclusion of the review once such a default is cured would depend on (1) the
speed with which the default is cured; (2) an assessment of the likely effect
on future borrowing costs; and (3) whether there is a change in process for
raising the debt limit that would preclude another default. A return to a Aaa
rating would be unlikely in the near term, particularly if there were no
progress on the third consideration.
While the debt limit has been raised numerous times in
the past, and sometimes the issue has been contentious, bond interest and
principal have always been paid on time. If the debt limit is raised again and
a default avoided, the Aaa rating would likely be confirmed. However, the
outlook assigned at that time to the government bond rating would very likely
be changed to negative at the conclusion of the review unless substantial and
credible agreement is achieved on a budget that includes long-term deficit
reduction. To retain a stable outlook, such an agreement should include a
deficit trajectory that leads to stabilization and then decline in the ratios
of federal government debt to GDP and debt to revenue beginning within the next
few years.
Moody's does not take a position on what measures should
be included in any deficit reduction package. Instead, it is the resultant
deficit and debt trajectories that are relevant to the rating and its outlook.
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New Math....
As a matter of fact I think this country started to go down the tubes about the same time new math came along.
Only in the good 'ole U.S.S.A.! Its hard to believe we have sunk this low. The stock-market BullTards should have a Bulleyes on their forehead for buying the Bernanke put. Since when does one celebrate the decimation of an economy and a soverign nation? Oh, only when the sheeple have been put to sleep by the MSM. Those who game this nonsense should be executed!
Not quite. Moody's is considering a downgrade not because of too much debt, but because of the increased possibility of a missed payment if the ceiling isn't raised. As a sovereign issuer of currency, the US can always make interest and principal payments if there is political will. Moody's knows this and so isn't too concerned about the debt level. But they are rightly concerned about the political will.
Fuck these fucking financial terrorists. Default bitches, bring it. Crash the system, the sooner we do, the sooner compensation returns to people that are actually worth a shit.
If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed.
Rating ponzi schemes, now that must be the next best lucrative line of business.
Due to an unfortunate lack of credibility...lol
In light of the downgrade I propose that Ben and Timmay wear a pasta strainer on their heads
Austrian Man Wins Right To Wear Pasta Strainer In License Photo : The Two-Way : NPR http://n.pr/o2qbc4 because he belongs to The Church of the Flying Spaghetti Monster
Bear Cavalry.
Okay, that made my day.
mine too...how awesome is that
The key takeaway is they need to see credible debt trajectory within the next few years, meaning not in the back years, but FY 2012, FY 2013. That would require passing something like the Bowles-Simpson package which is simply not on the table.
""To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years."
Another false flag op?
Oh, sure, like they ever gonna downgrade the US. They got a lot of criticism lately(from outside of US), so now they came with this cover to silence all the doubters. I´ll believe them when it actually happens, until then it´s just the usual BS.
And for the brain-limited, here's how its gonna play out.
http://www.youtube.com/watch?v=8vQMuwRjI6s&feature=player_embedded
Bitchez.
More like this:
http://www.youtube.com/watch?v=8Qz1sXJsCWw
http://www.youtube.com/watch?v=-taU9d26wT4
NRA: The Untold Story of Gun Confiscation After Katrina
First, the debt ceiling will be increased and Moody's will never ever downgrade the US (or the company will quickly become a criminal organization and employees go to prison until one day before next debt ceiling increase). Second, there is no short-lived default as there is no partial meltdown. A downgrade to AA will very likely increase interest rates to levels for a D rating. Thus again, no proper analysis from Moody's when it comes to the US.
Pass the KY Jelly. We are f**ked.
yawwwn, call me when auctions start failing, not pricing at negative yields.
It would be fun to see if margin requirements on treasuries are raised. Just imagine amount of margin calls.
"An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate"
Yes, it does seem likely that an Aaa credit rating would no longer be appropriate for an entity that defaults on its credit contracts. It is also possible, although admittedly debateable, that an Aaa rating might possibly not be appropriate for that same entity in actual advance of it becoming patently and demonstrably bankrupt.
The silver lining to this cloud is that these morons are sequestered in the financial sector, rather than in the real economy where they would be required to produce something of actual use.
Now now there's no need to be that way. If you were Moody's and looking at the credit rating of a desperate, nuclear-armed Fascist state, you'd be mighty careful too.
Shit is about to hit the fan.
Shit doesn't need to hit the fan: the fan is made of shit and is falling apart and slinging shit around the room.
and the room is really not a room at all, but a slurry pit.
I think that the 30 year rallied on the news....lol !!!!! Fucking Joke. After the mortgage fiasco, does anyone seriously give two shits about what Moody's says or thinks ? They are irrelavant and meaningless.
Can anyone explain to me why the hell I should care what Moody's, Fitch or S&P has to say? Those guys are the third leg of the three legged stool of ponzi-crime. All of their ratings are bought and paid for by TPTB. Mark Zandi - I wet fart in your general direction, you hack scumbag.
People just accept what they've been told to accept. If a monkey with a scepter was believed by enough people to be a ratings god--sure enough, more and more people would believe it, until the conventional wisdom was that the monkey was THE ratings god.
I don't know whether to thank you or curse you but from now on, I shall envision Bernake/Obabma as a Monkey in a Red Cape holding a Scepter whenever they speak. It puts things in perspective.
SNB about to go nuts lol.
Almost comical.
Jeebus, does Moody's have a premium service to f&*k with thin AH markets at option expiration or something. Couldn't be done Monday to minimize impact on markets.
With the reversal during towards the end of the day, ya think Moody's leaked this press release to an elite few?
And while we're at it -- How the hell does Moody's et al. have any credibility left. Did they click their ruby slippers three times and say "2008 Crash didn't happen,didn't happen,didn't happen" and all is well with their ratings opinions.
When everything is a scam, credibility is a moot concept. These days, they just rely on plausible deniability.
Moody's is a terrorist organization who has declared war on the United States of America.
Oh my God, they killed Benny! ...You bastards!
Lulz! ;D
FOREX near frozen? Huge spread on the EUR and hardly any movement.
Today, little Georgie Stephanopoulos said Obama has done "remarkably well".
"Remarkably well" at absolutely assuring our collapse with no hope of drawing back or delaying such collapse, a better "tool" could not have been found for the coup de grace.
He is a "small" man with NO redeeming qualities. This lilliput will go down in History as the nonentity who pulled the trigger to finish us off.
We are a raging, dying King Lear about to be capped by a carbuncle.
The emperor has no clothes.... ha ha ha ha
This is an inside job. Scare the plebs to accept the debt ceiling and QE3. Classic Problem, Reaction, Solution paradigm.
No doubt. This headline from CNBC says it all...
Will Congress Let US Default, Stocks Crash to Get a Deal?
As David Einhorn wrote in his quarterly letter to clients last week, if S&P even considered the possibility of a missed coupon payment in the near future then a AAA rating makes no sense to begin with. This is truly such a joke. "If you don't take on more debt that you'll never pay back, we will downgrade your credit worthiness." This notion, which is exactly what Moody's is implicitly saying is essentially admitting that the entire Treasury market is a Ponzi scam. Nobody in their right mind would give credence to the belief that taking on more debt should make somebody more likely to repay debt. The only context in which this makes sense is when soembody is paying debt only by suckering in more people to borrow from. This is the reason we will see QE3, QE4, QEx - forget the Russel, this is all about funding the US government. The Fed and all central banks were created by governments simply as accomodative fiscal instruments.
This is completely normal banking practice. They only ever lend to those who don't need the money. If you demonstrate that you need the money, you have admitted that you are no longer worthy.
Short and long term issuer rating have a conceptual flaw. They don't make the crucial difference between principal and interest payments. Moody's conclude in its probability assessment that repayment of US principal debt is granted and considers an AAA rating as appropriate. For the limited time the US is deferring interest payments on some of its debt we issue a temporary SD rating. (sarcastic)
5-yr. yield still at 1.44%
http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/
Heh, no impact on bond yields whatsoever.
Bernanke is probably laughing his ass off right now, thumbing his nose to the ratings agencies.
How's that collapse in Gold Prices you were predicting last week?
Never predict anything beyond 48 hours.
I did say yesterday that gold's breakout increased the odds significantly that global stock indexes would be making new highs eventually.
you gave a one year in advance prediction that std would be the best performer for 2011.
Sexually Transmitted Diseases always come from the "best performers".
The gift that keeps on giving.
Things Are Tough All Over
Things Are Tough All Over
It's just a flesh wound, nothing to see here
Obligatory Monty Python:
http://www.youtube.com/watch?v=zKhEw7nD9C4
Moody's demonstrating a lack of sovereign discrimination...
I see the U.S. is going up in bra size.
"...given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations."
Really?!?!? That's the only reason?!!? If this event does not occur, then the debt is still sound, trip-A? Riiigggghhhtttt
How long before sheeple start to understand what is at stake; the entire World Economy depends on the U.S. tax payer borrowing 2 Trillion dollars. So, we have a debt problem that can only be averted if more people are taken out behind the woodshed and searched by the TSA.
Borrow 2 Trillion dollars "or else!"
Return free rate of risk.
Excellent work by the fed, and the ship of fools that enable them: congress.
So it this bullish? Are we dumping treasuries and buying S&P and gold?
Throwing everything but the kitchen sink to create fear. Does everyone realize we have been operating beyond our debt ceiling means?
Use the fucking Patriot Act.. Believe or not, it was designed to protect you against financial terrorism.
Not.
mark my word
1. Debt limit will be raised in time.
2. US will not default because of the debt limit, US default when foreigners realized it is a ponzi scheme (happening slowly already)
all the rating stuff, Ben's comment on risk of default, are just tactics to threaten the congress to do what the big banks want. Remember how they stuffed the 800 billion TARP into American's mouths? 99% Americans are against the bailout!
The Bankster's lobbyists are twisting arms in the backrooms of the Capitol, calling in their chits and producing DVDs of sexual exploits taken while the congressmen were on junkets in China.
They don't have it in them, most of them. They never did, that is how they got there and stayed there. Most of our Congress Critters are closet molesters of the Constitution. It is just now that the door has accidentally swung open, and the lurid light is revealing all.
We need four more election cycles to purge the place, but we have run out of time.
Hang on, Greece haven't actually defaulted yet... But if the US actually do, their rating remains Aa?
The absurdity in Moody's statement is that it suggests that the US should increase the debt ceiling. As a rating agency....they should just be concerned with eliminating the deficit. They should not be offering counsel on how to acheive it. Why didn't they suggest cutting the size of government and raising taxes on the rich ? This would be a solution. Instead, they've opted to suggest that the best option is to kick the can further down the road. Fucking elitist bitchezzzz rating agencies.
A-fuckin-men brother. Moody's mouthpiece aka Mark Zandi is a govt shill of the first order, angling for an admin job and looking for any oppt. to choke Obamster's chicken. I heard Sen. Mark Rubio reference the ratings agencies opinions on the radio yesterday, stating that when the ratings agencies come down on the U.S. that is is when we are "officially" in trouble. Bullsheet. Rubio needs to get with the program and understand the ratings agencies are in on the game, controlled by the very assholes they claim to rate. The ratings agencies are a part of the problem - not part of the solution. Go check what the ratings "pros" had to say about Enron or anyone else in the TPTB Club before they went Tits Up.
You can no longer significantly cut the size of government without doing the same (and probably to the same factor) to the population. Keep that in mind.
Actually, this release just further confirms that the rating houses are in bed with the gov't and TBTF's. Not raising the debt ceiling does not translate into an automatic default on interest payments.
No it doesn't. But just paying the big four (Soc Sec, Medicare, interest, and wars) pulls $150-200bln out of the economy in August alone. It's an automatic double dip.
Probably on reciepts alone could make it tell October and then what?
Let's see spending prioritization in real time. You will have your answer.
If you do any degree of real spending prioritization, you get your default then.
Can you pay the debt service and either one of these two things on tax receipts alone?
1) Federal government benefits (SNAP, SS, SSI, etc.)
or
2) The cost of maintaining the peace at home when you cannot do #1.
My guess is that you cannot.
Moodys and other rating firms have stated that simply raising the debt ceiling would not be enough and that spending cuts would need to accompany.
Moody's has as much street cred as Jimbo Cramer, Bubbles Bernanke, Turbo Timmay, John Edwards, Anthony Weiner, current administration, ...
They won't do a thing unless Goldman gives them permission.
Well stated and how true.
Bernank: "Gold is not money and water is not wet."
"Good night now."
hello, warren? timmah.
...yeah i heard. are you ok? that's gotta be tough coming outa the shower and sitting on the bed and having that model train locomotive surgically removed, afterward. you and DSK should be more careful, hahahaha! yes, lloyd told me the chocolate donut joke!
listen, the head nigga says to have your guys @ moody's proceed. have yer puppets release that press release we sent over last week, ok?
thanks, and tell becky to try the HO scale. those lionels gotta hurt!
Donkey Kong, bitches!
This downgrade may be a veiled threat or it may not. Understand though that any downgrade of US debt to something other than AAA will be catastrophic for funds and pensions who are required by rule to hold only the highest grade debt. The ripple effect/contagion will hit every market when the actuality of the downgrade occurs because of the forced sales. This should not be just disregarded as a ratings agency playing politics in my opinion.
Yes. UST debt is the cornerstone of the US (at least) credit markets, like it or not. If it goes down there is no replacement--no place for those trillions to go. Chaos.
That's basically where we are. If they don't either raise the debt ceiling or constitutionally declare that one is no longer necessary (and, really, never was), the default occurs. _When_ the default occurs specifically is another question, but it forces a default in early- to mid-August, September 1 (see earlier question -- can you either pay the benefits or keep the peace while servicing the debt?) at the latest.
...and that is precisely why it is an empty threat.
I thought paying back USTs in debased dollars was already equivalent to paying back at less than par and hence a technical default. I believe the Chinese rating agency made a similar complaint.
We've been in technical default for quite some time (definitely since we passed the debt ceiling in truth and have been relying on raiding the pensions).
The only question is when the curtain gets pulled and The Great And Powerful Oz is revealed for what he actually is.
This is the exact opposite of everything that has happened since 1970s in the US:
Yet Ben keeps walking into the room and Obama keeps walking out of the room.
S&P up 5% Thursday!
Strangely very muted reaction in futures.
I believe this debt ceiling charade is the false-flag event leading to confiscation of 401k assets, the next big step in banker plans for looting America.
Of course it won't be called confiscation. It will be announced as temporarily borrowing those assets.
They'll never be given back of course.
No "Reality" meta tag?!?! come on Tyler!! That's my fave meta tag!!!
Oops! Moody's won't be an NRSRO for very long.
WHO THE HELL CARES?
US is bankrupted already. boomers retiring, ponzi scheme fail. done. banksters already took their loot.
At this point, if you still rely on ratings agencies, you deserve to lose all your investments.
Buffet, you hypocrite.
Buffet's father said any currency not backed by gold is bulls**t currency ( I paraphrase )
Buffet should listen to his father.
1) I do not believe there will be a debt deal at all. I believe someone is going to have to 100% capitulate or the threats will become actual.
2) Will the checks go out? Good question.
The populace of the U.S. is already defaulting; the politicians and bankers just don't realize the kind of shit storm they kicked up in 2008.
DEFAULT
JUBILEE TIME!
http://en.wikipedia.org/wiki/Jubilee_(Christianity)
OT but relevant to ZH anyway:
Gold vending machines are to be placed in every major city in Britain after the country's first machine was switched on in a West London shopping centre.http://www.telegraph.co.uk/finance/financevideo/8635217/Gold-ATM-machine...
On a less serious note, today's Italian bond auction went... well, it went... comment could be... "it could be raining"... KA-BOOOM!