Fitch warns of possible downgrade in US credit rating

WASHINGTON — The Fitch credit rating agency has warned that it is reviewing the U.S. government’s AAA credit rating for a possible downgrade, citing Thursday’s looming deadline to increase the nation’s borrowing limit.

Fitch has placed the U.S. credit rating on negative watch, a step that would precede an actual downgrade. The agency said it expects to conclude its review within the next six months.

Fitch says it expects the debt limit will be raised soon, but adds, “the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”

Fitch is one of the three leading U.S. credit ratings agencies, along with Standard & Poor’s and Moody’s. S&P downgraded U.S. long-term debt to “AA” in August 2011.

From here.

Moody's downgrades French credit rating

The credit ratings agency Moody's has downgraded France from its top rating.

The country's debt has been reduced from AAA to AA1 and has kept its negative outlook, meaning it could be downgraded again.

In a statement, Moody's blamed the risk of a Greek exit from the euro, stalled economic growth and the chances that France will have to contribute to bailing out other countries.

Rival agency Standard & Poor's downgraded France in January.

Read the rest here.

US Credit Downgrade Likely

The sovereign credit rating of the U.S. will be cut as “fiscal theater” plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s largest bond fund.

“The U.S. will get downgraded, it’s a question of when,” Scott Mather, Pimco’s head of global portfolio management, said today in Wellington. “It depends on what the end of the year looks like, but it could be fairly soon after that.”

The Congressional Budget Office has warned the U.S. economy will fall into recession if $600 billion of government spending cuts and tax increases take place at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said.

In a “base case” of President Barack Obama being re- elected and Congress becoming more Republican, there is a high likelihood an agreement “doesn’t happen in a nice way, and we have disruption in the marketplace,” he said.

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SEC Sues the One Rating Firm Not on the Take

The Securities and Exchange Commission, it seems, has finally lost its mind.

In April, motivated by what I consider pure maliciousness, the SEC initiated a “cease and desist” administrative proceeding it deemed “necessary for the protection of investors and in the public interest” against Egan-Jones Ratings Co., a privately owned, 20-person firm based in Haverford, Pennsylvania, and against its principal owner, Sean Egan.

Egan-Jones, founded in 1995, is one of nine ratings companies that the SEC has accredited as “nationally recognized,” allowing the firm to rate the debt of sovereign nations, companies and asset-backed securities, among others. Notably, it is the only one of the nine that gets paid by investors instead of by the issuers of securities.

The bigger and better-known ratings companies -- Standard & Poor’s (owned by McGraw-Hill Cos. (MHP)), Moody’s Corp. (MCO) and Fitch Ratings Ltd. -- are paid by the Wall Street banks that underwrite the debt securities of corporate issuers. That is, the companies are beholden to the sellers of the products they are supposed to pass judgment on, not the buyers. That’s akin to allowing the Hollywood studios to pay the nation’s film critics for their opinions.

Read the rest here.

Moody's downgrades credit rating for 15 major banks

Ratings agency Moody's downgraded the long-term credit ratings of 15 major U.S., Canadian, and European banks today after markets in New York closed.

Of the 15 firms downgraded this afternoon, none were hit more than Moody's originally said was possible when it placed them on review in February.

The action will likely force many of the banks targeted post additional collateral against trades held on their books.

Below, a summary of the major ratings action taken.

Cut One Notch:

    HSBC downgraded to Aa3 from Aa2
    Lloyds TSB downgraded to A2 from A1
    RBS downgraded to Baa1 from A3
    Societe Generale downgraded to A2 from A1

Cut Two Notches:

    Bank of America downgraded to Baa2 from Baa1
    BNP Paribas downgraded to A2 from Aa3
    Barclays downgraded to A3 from A1
    Citigroup downgraded to Baa2 from A3
    Credit Agricole downgraded to to A2 from Aa3
    Goldman Sachs downgraded to A3 from A1
    JP Morgan Chase downgraded to A2 from Aa3
    Morgan Stanley downgraded to Baa1 from A2
    RBC downgraded to Aa3 from Aa1
    UBS downgraded to A2 from Aa3

Cut Three Notches:

    Credit Suisse downgraded to (P)A2 from (P)Aa2

In February, Moody's also placed Nomura and Macquarie credit ratings on watch for downgrade. However, the agency took action before today, lowering Nomura and Macquarie by one level each, to Baa3 and A2, respectively.

Read the rest here.

This is really bad news for the banking sector which was already weak.

Credit Agency Downgrades US Debt Rating

(Reuters) - Egan-Jones Ratings downgraded the credit level of the United States as Washington has struggled to reduce the federal debt burden, which is projected to surpass the size of the country's economy.

The independent rating firm, which issued the downgrade late Thursday, said its senior debt rating on the United States is now AA, its third highest rating, down one notch from AA-plus.

It also maintained a negative watch on the world's biggest economy as the federal debt load could rise to $16.7 trillion at the end of 2012. U.S. gross domestic product, in the meantime, could grow to $15.7 trillion, assuming it would grow at a rate of 2.5 percent, the firm said.

The firm downgraded the United States for second time in less than nine months "because of the lack of any tangible progress on addressing the problems and the continued rise in debt to GDP," said Sean Egan, co-founder of firm, in an e-mail statement.

Read the rest here.

EU Weighs Credit-Ratings Bans for Nations Getting Bailouts

Oct. 20 (Bloomberg) -- The European Union may ban credit- ratings companies from making assessments of nations receiving European or international bailouts as part of plans for tougher regulation of the industry.

“We are actively considering suspending or banning ratings” in cases where nations are making “full efforts” to implement assistance programs, Michel Barnier, the EU's financial services commissioner, told reporters in Brussels today. The measure may be included in a draft law that Barnier will present in November.

The EU may also force the companies to disclose the internal analyses they use when they decide to cut a government's rating, according to Barnier, who said that he wanted to ensure “there is a clear method” behind such downgrades.

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S&P strips US of AAA credit rating

WASHINGTON — The United States lost its top-notch AAA credit rating from Standard & Poor's Friday in a dramatic reversal of fortune for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus. The credit agency said it was making the move because the deficit reduction plan passed by Congress Tuesday did not go far enough to stabilize the country's debt situation.

U.S. Treasury securities, once undisputedly the safest investment in the world, are now rated lower than bonds issued by countries such as the United Kingdom, Germany, France or Canada.

The move is likely to raise borrowing costs eventually for the American government, companies and consumers.

"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," S&P said in a statement issued late Friday, after financial markets were closed for the week.

Read the rest here.

Long overdue.

Egan-Jones Officially Cuts U.S. Credit Rating

Cutting a credit rating is significantly different that placing it on ‘watch’ or ‘under review’.

Most readers are likely fully aware that Standard and Poor’s and Moody’s have sent out serious warning signals about the potential downgrade of the United States AAA credit rating.

That said, another SEC officially recognized ratings entity has gone one step further and actually lowered Uncle Sam’s standing by one notch.

What firm is so bold and brazen to send this volley across Capitol Hill and down Pennsylvania Avenue?

Egan-Jones.

Unlike the supposed brand name rating agencies which did little to help ordinary investors going into our economic crisis, Egan-Jones’ business model differs markedly from the industry incestuous nature of its counterparts. The resulting lack of inherent conflict allows Egan-Jones to speak freely and boldly. What a novel concept.

What does Egan-Jones have to say about Uncle Sam?

Read the rest here.