Saturday, 6 August 2011

Standard & Poor's strips US of AAA credit rating in historic move

  • Damian Paletta
  • From: The Wall Street Journal
  • August 06, 2011 12:41PM

White House
S&P has downgraded its rating on US Treasury debt. Source: AFP

A CORNERSTONE of the global financial system was shaken today when officials at ratings firm Standard & Poor's said US 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 US 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 US debt to AA+, a score that ranks below Liechtenstein and more than a dozen other countries, and on par with Belgium and New Zealand. S&P also put the new grade on "negative outlook", meaning the US has little chance of regaining the top rating in the near term.

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. Around 1:30pm (New York time), S&P officials notified the Treasury Department they planned to downgrade US debt and presented the government with their findings.

 Treasury officials noticed a $US2 trillion error in S&P's math that delayed an announcement for several hours. S&P officials decided to move ahead anyway, and after 8pm (10am today AEST) they made their downgrade official.

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