Debt Ceiling

Is The White House Jamming Republicans Over The Debt Ceiling?

Brian Beutler | December 27, 2011, 1:00PM

President Barack Obama and Senior Adviser David Axelrod

Is the White House taking advantage of the holiday recess to thumb its nose at Congressional Republicans over the nation's debt limit?

That's one interpretation of an announcement Treasury Department officials made today, which sets in motion an automatic increase in borrowing authority while Congress is out of session.

All of this dates back to the destructive summer fight over whether, by how much, and under what conditions to raise the national debt ceiling. Back then, the White House sought over $2 trillion in new borrowing authority -- enough to assure the country avoided another debt limit fight in the middle of election season, when members of Congress might be even more willing to put the country's creditworthiness at risk for short-term political gain.

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S&P

Experts Question Ratings After S&P Gives Subprime Bonds Higher Rating Than U.S. Debt

Brian Beutler | September 2, 2011, 5:18PM

Influential investors are scratching their heads over a little-noticed development: After downgrading the country's credit rating, Standard & Poors is continuing to award AAA status to the same class of assets that nearly blew up the world economy three years ago.

From Bloomberg: "S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties."

In other words: U.S. Treasuries -- widely believed to be the safest investment in the world -- don't make the cut, but subprime mortgage investments do? What gives?

Subprime mortgage-backed securities are the same class of assets that fueled the housing bubble and triggered the 2008 financial crisis. According to a 2010 report by the Senate Permanent Subcommittee on Investigations, the main ratings agencies fell over themselves to give these bonds AAA ratings, then abruptly downgraded them to junk status after mass mortgage delinquencies made maintaining the false ratings untenable.

According to the subcommittee's report, "In the end, over 90% of the AAA ratings given to mortgage-backed securities in 2006 and 2007 were downgraded to junk status, including 75 out of 75 AAA-rated Long Beach securities issued in 2006. When sound credit ratings conflicted with collecting profitable fees, credit rating agencies chose the fees." This triggered a collapse in mortgage-related securities leading to trillions of dollars in investor losses and a credit freeze that contributed to -- some contend caused -- the financial crisis.

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Default

Who's Really Responsible For U.S. Debt Downgrade

Brian Beutler | August 17, 2011, 10:00AM

Rep. Michele Bachmann (R-MN)

This article was updated at 10:00am Eastern on August 17, 2011 to include additional names pointed out by TPM readers.

Now that Standard & Poors has confirmed that the chorus of default doubters in the GOP was part of what spooked them into downgrading the U.S. credit rating, Republicans will do all they can to pretend that they never questioned the risk of missing payment obligations, or allowing borrowing authority to lapse. But they sure did! Here's a long, partial timeline of influential Republicans either vouchsafing default, or downplaying the consequences of passing the August 2 deadline without raising the debt limit.

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Debt Ceiling

After Triggering Downgrade, Debt Default Skeptics Try To Run From Their Records -- But They Can't

Brian Beutler | August 12, 2011, 10:16AM

Standard & Poors has a specific justification for downgrading the U.S. bond rating, and it's deadly for Republicans. It wasn't just that Congress showed itself to be reckless and dysfunctional, or that the GOP shows no sign of ever ending their anti-tax jihad. It's that for a period of weeks, some lawmakers (read: Republicans) were quite literally shrugging off the risks of blowing past the August 2 deadline, running out of borrowing authority, and missing payment obligations.

"[P]eople in the political arena were even talking about a potential default," said Joydeep Mukherji, senior directior at S&P. "That a country even has such voices, albeit a minority, is something notable," he added. "This kind of rhetoric is not common amongst AAA sovereigns."

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Mitt Romney

Did Mitt Romney Raise Taxes Or 'Close Loopholes'?

Benjy Sarlin | August 12, 2011, 9:40AM

News that then-Governor Mitt Romney's office played up his predecessor's tax hikes to secure a better rating from Standard & Poor's may undercut his hardline anti-tax image. But the S&P story also revives a longstanding debate over Romney's own revenue raisers as governor, an issue that takes on greater significance than it did in 2008 thanks to the recent debt ceiling talks.

On Wednesday, Politico reported on a presentation Romney's office gave to S&P in 2004 touting the strength of the state's budget thanks in part to a 2002 tax increase that he opposed. The presentation also highlighted higher fees and newly closed loopholes that Romney championed himself. While Romney supporters have long argued these policies should not count as tax increases, critics have long insisted otherwise and the S&P story pushes the debate into the headlines once again.

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2012

Mitt Romney Touted Tax Increase To S&P In '04 Presentation

Benjy Sarlin | August 11, 2011, 9:57AM

Mitt Romney

Mitt Romney insisted that Republicans rule out any tax increases in negotiations to avoid a debt ceiling default, but as governor of Massachusetts they were a key selling point in his efforts to raise the state's S&P rating.

In a presentation from 2004 obtained by Politico's Ben Smith, the Romney administration touted a 2002 tax increase of over $1 billion approved by his predecessor as evidence the state was in good fiscal health. According to the 50-page presentation, Massachusetts "successfully managed revenue and expense positions" in 2002 and 2003 and "acted decisively to address the fiscal crisis."

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Treasury

CHART OF THE DAY: S&P's $2 Trillion Error Explained

Brian Beutler | August 8, 2011, 12:20PM

President Barack Obama and Treasury Secretary Timothy Geithner

In the weeks leading up to last week's debt limit deal, the ratings agency Standard & Poors warned that they would downgrade the country's AAA bond rating if the White House and Congressional leaders couldn't reach a fiscal consolidation plan of at least $4 trillion over 10 years.

The Congressional Budget Office scored the deal they ultimately reached at just over $2 trillion and S&P, perhaps feeling locked into its threat, made good on it.

The implication, to borrow from the Vice President, is that $2 trillion worth of deficit spending over ten years is a BFD.

But as Treasury Department officials, including Secretary Tim Geithner, have been angrily pointing out since Friday night, S&P's original analytical justification for the downgrade included a $2 trillion error, exaggerating U.S. deficits over the same 10 year window.

Geithner himself said, "[t]hey've shown a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement."

Most reports have simply alluded to the error without explaining it. But here, according to Treasury officials, is what actually happened.

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Debt

Crisis Or Opportunity? Leaders Eye Up Paths Ahead After S&P Downgrade

Thomas Lane | August 6, 2011, 4:55PM

Senate Majority Leader Harry Reid (D-NV)

It's a staple of business management books that the Chinese character for "crisis" also stands for "opportunity." Despite the fact that this isn't actually true, it has also filtered into the political discourse. The S&P downgrade presents a classic crisis/opportunity situation, namely: will political leaders use this moment to bridge their differences and agree on a credible plan that involves both spending cuts and additional revenues? Or will they simply use it as a chance to say, "I told you so!" and slag off the other side? So far the signs are mixed.

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