s&p: washington criticism is a 'smoke screen'

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    S&P: Washington criticism is a 'smoke screen'

    By Jennifer Liberto
    CNNMoney August 8, 2011: 10:00 AM ET

    WASHINGTON (CNNMoney) -- Standard & Poor's, the credit rating agency that lowered the grade on the federal government's credit worthiness, continued its defense of its move Monday, calling Washington criticism a "smoke screen."

    "This idea that we made a $2 trillion error is simply a smoke screen for the unhappiness, in our view, about our decision," said David Beers, S&P's global head of sovereign ratings, in an interview on CNN's "America Morning."

    In a conference call, S&P leaders went into more detail about the reasons they downgraded the U.S. creditworthiness on Friday, saying it reflected the nation's dour fiscal and political position.

    S&P officials talked about rising public debt, pointing out that slowing economic growth also played a part. But mostly, the rating was based on Washington's political paralysis to deal with long-term debt, punctuated by a prolonged procrastination in averting a crisis last week, when leaders raised the cap on U.S. borrowing at the last minute.

    "We think the debacle about raising the debt ceiling is one illustration of that," said John Chambers, chairman of Standard & Poor's sovereign debt committee.

    "We think elected officials across the political spectrum are unable to proactively put the U.S. on sustainable footing, as some of our most highly rated governments (have done)," Chambers added.

    S&P rating downgrade: FAQ

    In talking to CNN, Beers took particular issue with criticisms made by Treasury Secretary Tim Geithner on Sunday, when he told NBC that the agency they "drew exactly the wrong conclusion."

    Beers pointed out that even Geithner acknowledged the harm done to the U.S. reputation, when leaders took until the last possible minute to come to a deal, and that the U.S. remains on an unsustainable path.

    "So it seems that the Treasury isn't challenging the analysis both on the political side and on the fiscal side. They're just unhappy with the downgrade, but we stand by our decision," Beers said.

    Beers talked to CNN about further downgrade possibilities, saying there is a 1-in-3 chance the United States could be downgraded again in the next six to 24 months.

    However, S&P officials said on the call that they didn't anticipate a further downgrade happening unless there's "further fiscal slippage." One example of that slippage: If the special bipartisan congressional panel, established by the debt deal, fails to come up with cuts.

    But Beers also said he didn't expect the Standard & Poor's would upgrade the United States anytime soon, "given the nature of the debate currently in the country and the polarization of views around fiscal views right now."

    He added that five nations have been upgraded back to AAA status from a downgrade, including Canada, Australia, Finland, Sweden and Denmark. But the speediest upgrade from AA status to AAA status took that nation nine years.

    Article HERE


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