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US is one step away from a D rating by S&P

Jun 30, 2011

I find it quite interesting that the credit rating of the US is presently at the perfect level of AAA, but a default would bring it immediately down to the LOWEST rating of "D". Going from top to bottom in one step? It seems to me that if Standard and Poor was realistic, it would lower the credit rating gradually according to the actual risk factors of a default.

In other words, at the first whiff of default talk over the budget crisis in Washington, they should lower the credit rating according to the actual risk of not being able to pass a budget. Instead, they seem determined to keep it as an all-or-nothing proposition. That smacks of politics, not reality.

http://www.bloomberg.com/news/2011-06-29/moody-s-would-likely-cut-u-s-debt-rating-to-aa-range-in-event-of-default.html

S&P would lower its sovereign top-level AAA ranking to D, the last rung on its scale if the U.S. can’t pay its debt, John Chambers, chairman of the company’s sovereign rating committee, said today. Moody’s said it would probably assign a position in the Aa range, or within three steps of its highest level.

“If any government doesn’t pay its debt on time, the rating of that government goes to D,” Chambers said today in an interview with Erik Schatzker on Bloomberg Television’s “Inside Track”. “Having said that, we think the government will raise the debt ceiling. They’ve raised it 78 times more or less since 1960, often at the last moment, and we think that will be the case this time.”


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Dr. Stephen Jones


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