[The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time.]
By Binyamin Appelbaum And Eric Dash
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The lowering of the country’s
rating could rattle
confidence and raise borrowing
costs for the
|
The company, one of three major agencies that offer advice to investors in debt securities, said it was cutting its rating of long-term federal debt to AA+, one notch below the top grade of AAA. It described the decision as a judgment about the nation’s leaders, writing that “the gulf between the political parties” had reduced its confidence in the government’s ability to manage its finances.
“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” the company said in a statement.
The Obama administration reacted with indignation, noting that the company had made a significant mathematical mistake in a document that it provided to the Treasury Department on Friday afternoon, overstating the federal debt by about $2 trillion.
“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokeswoman said.
The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time.
The announcement came after markets closed for the weekend, but there was no evidence of any immediate disruption. A spokesman for the Federal Reserve said the decision would not affect the ability of banks to borrow money by pledging government debt as collateral, a statement that could set the tone for the reaction of the broader market.
S.& P. had prepared investors for the downgrade announcement with a series of warnings earlier this year that it would act if Congress did not agree to increase the government’s borrowing limit and adopt a long-term plan for reducing its debts by at least $4 trillion over the next decade.
Earlier this week, President Obama signed into law a Congressional compromise that raised the debt ceiling but reduced the debt by at least $2.1 trillion.
On Friday, the company notified the Treasury that it planned to issue a downgrade after the markets closed, and sent the department a copy of the announcement, which is a standard procedure.
A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S.& P. issued a revised release with new numbers but the same conclusion.
In a statement early Saturday morning, Standard & Poor’s said the difference could be attributed to a “change in assumptions” in its methodology but that it had “no impact on the rating decision.”
In a release on Friday announcing the downgrade, it warned that the government still needed to make progress in paying its debts to avoid further downgrades.
“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” it said.
The credit rating agencies have been trying to restore their credibility after missteps leading to the financial crisis. A Congressional panel called them “essential cogs in the wheel of financial destruction” after their wildly optimistic models led them to give top-flight reviews to complex mortgage securities that later collapsed. A downgrade of federal debt is the kind of controversial decision that critics have sometimes said the agencies are unwilling to make.
On the other hand, S.& P. is acting in the face of evidence that investors consider Treasuries among the safest investments in the world. Yields rose before the Congressional deal on fears of default and a possible downgrade. But after a deal was struck, yields sank as money poured into Treasuries as a safe haven from sharply falling stocks and the turmoil of the European debt markets.
On Friday, the price of Treasuries fell sharply in heavy selling, and yields rose, reversing the moves of recent sessions. The 10-year Treasury note ended the day with a yield of 2.56 percent.
The United States
“What’s changed is the political gridlock,” said David Beers, S.& P.’s global head of sovereign ratings, in an e-mail several days before a debt ceiling agreement was announced. “Even now, it’s an open question as to whether or when Congress and the administration can agree on fiscal measures that will stabilize the upward trajectory of the U.S.
Experts say the fallout could be modest.
The federal government makes about $250 billion in interest payments a year, so even a small increase in the rates demanded by investors in United States
In addition, S.& P. may now move to downgrade other entities backed by the government, including Fannie Mae and Freddie Mac, the government-controlled mortgage companies, raising rates on home mortgage loans for borrowers.
However, because Treasury bonds have always been considered perfectly safe, many rules prohibiting institutions from investing in riskier securities are written as if there were no possibility that the credit rating of Treasuries would be less than stellar.
Banking regulations, for example, accord Treasuries a special status that is not contingent on their rating. The Fed affirmed that status in guidance issued to banks on Friday night. Some investment funds, too, often treat Treasuries as a separate asset category, so that there is no need to sell Treasuries simply because they are no longer rated AAA. In addition, downgrade of long-term Treasury bonds does not affect the short-term federal debt widely held by money market mutual funds.
In other words, almost no one would be precluded from investing in federal debt, and even the ratings agencies have concluded that few investors would walk away voluntarily.
@ The New York Times
Bangalore
India Union shall be Hindi
in Devanagari script," it also puts forth English as the other official
language. The status of being the official language will not automatically make
a language the national language. The law and the constitution have to give
this recognition, which in Hindi's case has not happened. This was made clear
in a ruling by a bench headed by Chief Justice S J Mukhopadhaya in the Gujarat
High Court in January 2010 in a hearing regarding issuing of directions that
packaged commodities must contain details about goods in Hindi.
[For so many decades now, we have
managed very well without a National Language. Not having a common language has
not stopped us from going anywhere in the country or interacting with anyone.
So can we not go on like this?]
By Silicon India
The fact stands that Hindi
remains to be the most spoken language in the country. It is this potential of
Hindi that helped it gain the status of Official Language of the Parliament,
along with English. The States are given power to select one of its widely
spoken languages or Hindi as the official language, along with English.
Furthermore, there are a very vast number of people who speak other regional
languages that has no resemblance with Hindi. Many of these regional language
speakers are so emotionally involved to their mother tongue, they would most
certainly protest against any other language being made into a National
Language. In fact this has been happening for so long now. Any attempt to make
any one of the inborn language of India
There is a long lasting battle
going on every now and then regarding this issue between the Hindi speakers and
other language speakers, especially so in Tamil Nadu. This battle started even
before independence, as early as the 1930s. The first agitation was between
1937 and 1940 in Tamil Nadu, after that the second one was between 45 and 50,
in 65, in 68, in 86; this has always been an ongoing process. It emerged every now
and then sparking a lot of controversy and unleashing a lot of hatred. There
has not been any major attempt to set a National Language in so many years and
so this battle is in a hibernation state for that duration and any attempt to
revive the National Language campaign will definitely unleash it again.
Do we really need a national language?
For so many decades now, we have
managed very well without a National Language. Not having a common language has
not stopped us from going anywhere in the country or interacting with anyone.
So can we not go on like this?
When it comes to a common
language, as many people who know Hindi, or even more, knows English too. Here
comes the argument about English being a foreign language, the language of the
colonialists and all! All these are true but that does not change the fact that
English is now, a Global Language, and we are among the ones who embrace it.
Look how the English Medium schools in the country are attracting the vast
majority of the students. Look at all the BPO and the IT industry in the
country, whose backbone is the English speaking population of the country.
The point is, in this global
world where the whole world is eyeing on us, do we really need to demonstrate differences among ourselves on matters of having a national language?
@ Silicon India News
@ Silicon India News
