A Scarier Milestone - S & P Downgrades U.S. Credit

In a move with perhaps major significance, Standard and Poors announced this evening a downgrade of U.S. credit.  The announcement was made after the U.S. markets closed and on a Friday evening, probably so as to give markets worldwide the weekend to digest the news.

The other two major ratings agencies, Moody's and Fitch, have not yet effected any downgrade.

A Wall Street Journal article (http://online.wsj.com/article/SB10001424053111903366504576490841235575386.html?mod=WSJ_hp_LEFTTopStories) provides detail and the lead portion of the article is below:

"A cornerstone of the global financial system was shaken Friday when officials at ratings firm Standard & Poor's said U.S. Treasury debt no longer deserved to be considered among the safest investments in the world.

S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn't do enough to address the gloomy long-term picture for America's finances. It downgraded U.S. debt to AA+, a score that ranks below Liechtenstein and on par with Belgium and New Zealand.

The unprecedented move came after several hours of high-stakes drama. It began in the morning, when word leaked that a downgrade was imminent and stocks tumbled sharply. Around 1:30 p.m., S&P officials notified the Treasury Department they planned to downgrade U.S. debt, and presented the government with their findings. But Treasury officials noticed a $2 trillion error in S&P's math that delayed an announcement for several hours. S&P officials decided to move ahead anyway, and after 8 p.m. they made their downgrade official.

S&P said "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 also blamed the weakened "effectiveness, stability, and predictability" of U.S. policy making and political institutions at a time when challenges are mounting."