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Originally Posted by 12thMan
FRPLG, I'm not dismissive of the events or the downgrade for that matter. It's a huge deal. We've lost billions in market cap in less than two weeks. But I wholeheartedly stand by my criticism, rating agencies have no business dictating policy. Especially S&P. They are three years too late and a dollar short downgrading anything. Had they downgraded the failed banks and unscrupulous mortgage lenders that led to the financial meltdown, had they issued the proper warnings when conditions were right, the politics of this current debate would have been far less difficult and much more achievable, in my opinion. We'd probably be looking at a completely different chain of events with a different menu of options to address them. But that's all water under the bridge now.
If lawmakers want to take their cue from economic forecasts to shape policy, fine. It shouldn't be the other away around. In some twisted way, I feel like our democracy has been undermined.
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And ealier you said this:
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FRPLG, I didn't say the credit rating wasn't important. A credit rating agency, in my opinion, should issue downgrades or upgrades based on economic data; The models and metrics they've been using since the company was founded. Not politics. If you think I believe that the credit rating is somehow trivial, then I don't know what else to tell you.
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Its impossible for rating agencies to not dictate policy. When they downgrade a company that’s effectively what theyre doing. No matter the reason a company gets downgraded the rating agency is basically saying something needs to change and major change usually needs starts at top with management and policy. And rating agencies aren’t just using economic models to forecast growth, this isn’t pure science, it’s a mixture of art of science. It’s a evaluation of an entire company including qualitative factors. So for S&P to come out and put their primary concern on the management of US and question the policy of our leaders may be a stretch of what their main focus should be but it shouldn’t be something they neglect. When our 2 parties refuse to work together and play chicken with raising the debt ceiling it should be a concern of credit agencies and likewise investors who put trust in them.
I agree that you got to put less reliance in something that totally missed downgrading the failed banks and mortgage lenders that hurt us so badly 3 years ago, but what are you supposed to do ignore them? They made mistakes and now they are apparently acting more hawkish. If they didn’t downgrade US creditworthiness, like they failed to do so for the banks, should we be more concerned?