Tea Party

White House: Tea Party Is Wagging The GOP Dog

Susan Crabtree | October 12, 2011, 4:57PM

White House Press Secretary Jay Carney

White House spokesman Jay Carney on Wednesday trained his fire on the Tea Party, blaming "one element" of the Republican party for Standard and Poor's mid-August downgrade of U.S. credit worthiness.

In response to a a question about why support for President Obama is slipping among Latino voters, Carney readily acknowledged that approval ratings for both Obama and Congress have fallen sharply this year as Americans have grown increasingly disgusted by the brinksmanship between the two parties, which was on vivid display during the mid-summer debt crisis.

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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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Michele Bachmann

Bachmann: Obama Should Heed/Ignore S&P

Benjy Sarlin | August 8, 2011, 4:00PM

Michele Bachmann simultaneously chided the White House for paying too little and too much attention to Standard and Poor's downgrade of US debt on Monday.

"After a weekend of hiding out at Camp David, pretending that the Standard and Poor's ratings do not matter and hoping the markets wouldn't notice, the President discovered he was wrong on both counts," Bachmann said in a statement. "He came out just long enough today to again declare that raising taxes and cutting Medicare are his only solutions to our nation's economic crisis. He dismissed the downgrade of our country's credit rating, and argued that there's no more room for spending cuts in Washington."

Bachmann's criticisms are contradictory. While she clearly believes Obama is "wrong" to dismiss the downgrade, the ratings agency made it abundantly clear that the president's proposals to fix the problem -- entitlement reform and tax increases -- are exactly what is needed to strengthen America's credit rating.

According to S&P's own downgrade announcement,"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process."

Perhaps more than any other presidential candidate, Bachmann is on shaky ground tying herself to the S&P, since the agency also cited Republicans' threats not to raise the debt ceiling as a major cause for the downgrade. Bachmann took the position early in the debate that the debt ceiling should never be raised under any circumstances, meaning by S&P's account she contributed to the problem as much as any lawmaker in the country.

Barack Obama

Obama: 'No Matter What Some Agency Says, We Will Always Be AAA'

Susan Crabtree | August 8, 2011, 2:19PM

President Barack Obama (D)

President Obama in a somber address to the nation Monday sought to summon Americans' strength and perseverance as stocks continued in a 500-point free fall in the first trading day after Standard & Poor's rating service downgraded the nation's creditworthiness.

"Markets will always rise and fall," Obama told the nation. "No matter what some agency may say, we've always been and always will be a AAA country."

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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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