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Pimco sees S&P downgrading US debt from AAA
Posted on 04 August 2011 with 1 comment from readers
Pimco’s Mohamed El-Erian told Bloomberg Television’s Betty Liu yesterday that Standard & Poor’s ‘will downgrade the US’ if the ratings agency sticks to what it outlined last month.
He noted: ‘S&P has our sovereign rating on negative watch, which is a presumption of a downgrade. We are waiting to see what they do. We suspect they’re under tremendous pressure not to downgrade. If they stick to what they told the world on July 14, they will downgrade the US’.
Posted on 04 August 2011
Categories: Banking & Finance, Bond Markets, Global Economics, Investment Gurus, US Stocks, Video Channel
1 Comment posted by readers:
No doubt, the ratings agencies have been complicit in the mortgage corruption schemes of the past 5+ years. Individually and collectively, they have rated Collateralized Debt Obligations (CDOs) as AAA, when these CDOs were nothing more than re-packaged Tranches of junk mortgages (courtesy of the NY banks, of course).
Moody’s “decision” to keep the US Treasuries at a AAA rating were based on something like this:
Moody’s: “We want immunity from the potential prosecution that may come, as a result of the sub-prime mortgage mess, and the ratings of those mortgages and CDOs as AAA…”
US DOJ: “What are you willing to do to obtain this immunity?”
Moody’s: “Well, for starters, we’ll keep the US Treasuries at AAA, so that the government doesn’t have to pay higher interest on those bonds . . . ”
US DOJ: “OK, you’ve got immunity, but just remember, we didn’t have this conversation . . . ”
Moody’s: “Conversation? What conversation . . .”
One has to wonder whether the S&P folks are in that same box as Moody’s! Additionally, since the other “boyz” kept the rating at AAA, then S&P boyz are under a lot of pressure to do the same thing.
If I had to guess, I’d say the S&P boyz cave in, and extend the AAA for a while longer!