Daddy Big Bucks (Wall Street) will never get it right - Update

by: wvblueguy

Mon Apr 18, 2011 at 14:52:29 PM EDT

The stock market is having a really bad day today thanks to Standard and Poor's concerns about the USA and our deficit. I'm sure they are also concerned about Republican wing nuts in Congress threatening to bring the world crashing down by failing to increase the debt ceiling for the US.

Already frightened by fears about Europe's debt crisis and China's latest tightening, financial markets got really spooked Monday morning when Standard & Poor's cut its outlook on America's AAA debt rating to negative from stable.
The idea America could lose its AAA rating is not new but S&P's action makes it more likely as a real-world event; specifically, the outlook revision means a 33% chance of a rating change within 2 years, according to S&P.
An actual debt downgrade would raise the cost of interest payments for the U.S. government, as well as raise borrowing costs for U.S. consumers and corporations. Higher rates would have a crushing effect on the debt-laden U.S. economy, which helps explain the market's reaction: Treasury prices fell, sending yields higher, while money flowed out of stocks and other "risk" assets.

Huzzah for Standard and Poor!  They were the same dirt bags who helped destroy the stock market and banks by their totally criminal ratings of the mortgage based securities.  See Matt Taibbi by clicking here...

So this system depended almost entirely on banks like Goldman finding ways to securitize these instruments, ie chop the mortgages up into little bits, repackage them as mortgage-backed securities like CDOs and CMOs, and sell them to unsuspecting customers on the secondary market, most of them large institutional buyers like pensions and insurance companies and workers’ unions, many of them foreigners. Most of those customers were snookered into buying this stuff because they had no idea what it was: in the case of pensions and unions particularly, a lot of these customers only bought this crap because the peculiar alchemy banks like Goldman used in devising their mortgage-backed securities made radioactive mortgages look like AAA-rated investments. (Or at least they were given these ratings by Moody’s and Standard and Poor’s, ratings agencies that were financially dependent upon the very banks they were supposed to be rating — but that’s another story).

Emphasis mine.

Wonders never cease as now our major institutions are doing their best to prove that folks like Paul Ryan are right,

Read what James Fallows at The Atlantic has to say about the mrket event yesterday as well as Standard and Poor. He nails them.