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Charlie Gasparino is a senior correspondent for Fox Business Network. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His new book about the financial crisis, The Sellout, was published by HarperBusiness.
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The country’s top-notch credit rating is in danger of being downgraded, Moody’s is warning—and if a ratings agency that completely failed to predict the financial crisis is sounding the alarm, we should all be afraid.
Here’s how you know the massive amounts of debt compiled by the Bush administration, and the even greater debt loads promised as part of Barack Obama’s agenda, is reaching crisis proportions: Even the Wall Street bond-rating agencies are now sounding the alarm bells.
At issue is a report issued by Moody’s Investors Service that says the triple-A rating on U.S. government debt might someday be a thing of the past. The triple-A rating is, of course, an opinion, but one that carries a lot of weight in the bond markets. It is Moody’s belief that the chances the U.S. federal government will default on its debt are zero and that investors who hold U.S. bonds are guaranteed their full interest and principal payments.
The current warning shouldn’t be taken lightly, precisely because ratings agencies like Moody’s have been so late in the past. Calling attention to the country’s debt level must mean we are really heading for trouble.
In its report, the ratings agency still puts those chances at zero, but it adds that based on the sluggish economy and all of Washington’s new spending promises, the zero-percent probability of default is starting to look less and less likely in the years to come.
As someone who has covered ratings agencies and their role in the markets for two decades, I can tell you that they are masters of doublespeak because they’re constantly in cover-my-ass mode. The agencies are far from objective prognosticators; they publish ratings for investors, yet they are paid by entities that issue debt, meaning their bias is to go easy on bond issuers.
The U.S. government—as far as I know—doesn’t pay Moody’s or any of the other agencies, but the report calling into question the U.S. triple-A rating contains all the ass covering the rating agencies are famous for. Consider this: While Moody’s was raising the notion of a downgrade of U.S. debt based on the massive debt the country has accumulated and will accumulate in the coming years—causing the stock markets to fall in early morning trading—the agency also said the U.S. still has the ability to cover debt-interest payments with current revenue, though that revenue may not be enough given the weak economy and increased spending.
Of course, the U.S., like other highly indebted countries, can take steps to lower its debt load (i.e. higher taxes and cutting spending) though Moody’s says those steps “will test social cohesion.” You get my point.
Meanwhile, the raters’ track record in predicting a crisis of this magnitude is pretty weak, as well. Many of those esoteric bonds that were held on the books of the banks and later destroyed the financial system in 2008 because they were worth pennies on the dollar were rated triple-A. The raters, for example, gave Orange County, California, high grades before its bankruptcy in 1994, failed to see the bond-market implosion in 1998, and had no idea that the housing market was catering in 2007, until it cratered, and the bonds backed by risky mortgages were defaulting and spreading a virus that, save for a government bailout, would have destroyed what was left of the financial system.
That said, the current warning shouldn’t be taken lightly, precisely because ratings agencies like Moody’s have been so late in the past. Calling attention to the country’s debt level must mean we are really heading for trouble.
So what would it mean for a downgrade? First, higher borrowing costs.
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HollyK64
And passing health care will only add to this problem. Does Obama have a death wish for this country?
FarLeftFist
I think we should pass this debt on to the next administration, we have bigger issues to deal with currently. Of course Holly missed the memo that passing healthcare will actually lower our debt, but I'm sure she can't get caught up in things like facts and knowledge.
pennsykid2000
Why not? Bush passed $5 trillion in new debt on to Obama.
What I don't get is why Moody's and the other rating agencies are still in business and their executives aren't in jail. They were critical to the collapse of the markets in 2007 and 2008 due to their fraudulent rating of crap as AAA. One wonders if they are similarly overstating the fiscal health of the U.S.
caboclavo
Sorry far left,
but what "memo's" are you reading? They must be the ones put out by the present administration, and we all know that the present administration wouldn't lie to us, right? If you are so "privy" to the inside info that the rest of us don't receive, please tell me how we are going to pay for this without a complete collapse of our economy?
I'll be waiting for your response.......!
SteveStephens
Wabo in Cabo, everyone will be required to pay fot Health Insurance. It will be cheap, and everyone won't pay, but it will create an entire revenue stream for the Program. Besides, my congressman and my mailman love their government health care. They say it is great.
camper
Obviously your left fist was doing something to distract you. Did'nt your Mother tell you that that kind of behavior would make you blind. How long will you schmucks keep harping about the previous administration. Obama asked for the job. Obama knew the score. Obama is sucking air..... and we are all going to drown if he doen't get his feet on the ground....that said ,who the hell is Bush....sorry can't remember him.
SensiStar
caboclavo: The economy already collapsed. Did you miss the Bush years.
paulthiel
Are you, by any chance, a baby boomer?
VotersRemorse
Passing health care will actually lower our debt? Explain the math! Since when has anything the government done actually do what it was suppose to do? How can giving 30 million people health care actually lower debt? Again, explain the math! There are NO COST CUTTING features in the bill. Please, tell me one entitlement program the government runs that isn't going bankrupt?
annie123
You actually buy that healthcare will reduce the deficit? That is a joke. After all the budget gimmicks, and the underestimating of costs - the deficit is going to explode. To say differently is irresponsible - but that's nothing new for the left. They won't stop until we are pushed over the cliff.
Bloomy
What problem? Moody was right in the middle of the banking problem. Moody's gave AAA ratings to the banks to sell their Credit Default Swaps. They went hand in hand with Goldman Sachs, Morgan and the others. And now everyone wants to believe them. PASS. credibility is zero.
Ncmist
Obama knows that all we have to do is print more money and just keep passing the big lie to the public. Hey, the guy writing this is just a stupid republican who doesn't know squat. And besides, we'll just pass it on to the next administration, right FarLeft?
Damn Holly, get a grip.
urnee1
YOU need to research WHOM is printing the money nowadays. Start in
1933 with FDR for a hint. For those who need help... the Fed Res which is not connected to gov. is printing fast and furious......except you (us) have agreed to foot the bill..of course they will print more money...think you own that house, car, retirement, savings, think again
SteveStephens
Care to explain , or give any concrete examples, HollyK Teabagger?
lreyn84702
How about logic Steve? Can you give any concrete examples of how this does not increase the deficit, other than the President said so? The program relies on collecting tax revenues years ahead of paying out benefits in order to show a nuetral deficit for a ten year period. What happens after the ten year period, Steve? The same thing that happens to Social Security and Medicare. Wake up!
JohnR22
Obama is a messianic ideologue. He sees himself as a world-changing Man of History, and his ideology is extreme european-style socialism. He's gone all-in on HCR and once it's passed, plan for him to double down on Cap & Trade, immigration reform (i.e. amnesty), and education reform (i.e. subsized college tuition). He's more than happy to lose the House in November, and to lose the Senate/Presidency in 2012 if he can accomplish these things.
socialworklady
FEAR FEAR FEAR FEAR FEAR FEAR FEAR FEAR
akcita
Wow, you must pay your bills with good feelings.
As Social Security has been borrowed from for the past 40 years, it will soon be insolvent based on the IOU's that are being called in by Social Security on our government's last 40 years of borrowing.
So, borrowing more doesn't concern you?
I wonder what kind of help you give people as a social worker? is it the ACORN kind of help?
SensiStar
Bush could have saved SS. He decided to give the rich a tax cut at the cost of 1.7 trillion.
I'm pretty sure you supported those tax cuts even though they helped destroy our economy.
Or are you still waiting for all those rich people to shower us middle class people with jobs.
Aslanleon
akcita- socialworklady sneers at people who have beat alcoholism and are sober. That's about the level of her compassion and an indicator of her social work competence.
socialworklady
Aslanleon,
I assume you refer to my description of Beck as a "dry drunk."
"Dry Drunk" has been described as "A condition of returning to one's old alcoholic thinking and behavior without actually having taken a drink."
http://alcoholism.about.com/cs/info/a/aa081397.htm
I'm surprised, what with you being a member of the clergy, the police force, and a (part time?) history teacher that you have never seen this phenomenon.
Aslanleon
Oh, I've seen it. What I see when I read your comments is someone who is so blinded by politics that they attack their opponents on grounds they would be indignant about if someone did the same for their idols.
socialworklady
Aslanleon,
But isn't that what makes your country so great? ~ In his dry drunk state of mind, Beck has the freedom to cry:
FEAR FEAR FEAR FEAR FEAR FEAR FEAR FEAR FEAR
NAZI COMMIE NAZI COMMIE NAZI COMMIE NAZI COMMIE
BE VERY AFRAID AMERICA BE VERY AFRAID AMERICA
And I, an observer from another land, am free to visit an American owned blog and say:
Hey, this looks like classic dry drunk behaviour to me.
socialworklady
And one more thing, Aslanleon,
Since you are familiar with the dry drunk phenomenon, wouldn't you agree that Beck exhibits the symptoms of a classic case?
Aslanleon
Not unless being annoying is a symptom of being a dry drunk. Also, I do psychology, not pop psychology. It's more boring but explains more.
socialworklady
Aslanleon,
Okay. According to you, you've been a:
Police Officer
Clergyman
History Teacher
And you "do" pyschology.
Ummm....and how is it that you "do" this thing you do?
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socialworklady
DEATH WISH!
DEATH PANELS!
DOOM AND GLOOM!
HOLD ON TO YOUR KIDDIES!
RUN RUN RUN RUN RUN RUN!
THE SKY IS FALLING!!!!!!
(OH, AND TEH GAYZ ARE MARRYIN' TOO!)
END OF THE EMPIRE!
AAAAAAAHHHHHH!!!!!
DCraigLivingstone
You forgot the Repugs fav, 'TERROR!!!"
sailormoon
There is Death panels. They will not be able to provide, abortions.Now where is the poor, unable to go to the doctor and hospital go????Did you know Rita ?It is the end of the empire. Not for all. But certainly in 2 to 4 years.China, India ,Brazil and many other powerfull countries, are watching the downfall, calculating it and salivating it. They are not spending trillions in wasted wars, they spend it Home, and they have their own middle class growing&expandingThat gives, taxes, medicine,income ,growth, and hapiness.Hold on to your kiddies, because they have no school, and they get in trouble and dummer everyday.!!! Sorry, on many, many, families the sky is falling. Not on govt, and washington, and wealthy corporate and bankers. That is good, but the jobs of corporations and businesses are not growing here.call Jet Blue, wait 11/2 for a human being, and you will see what is happening.
wrathofkhan
What?
aliendeveloper
SocialistWorkLady, I'm glad you are having fun. The high intellectual content of your post pretty much reflects the current administration's mental ability to respond to criticism about a set of policies that are not grounded in reality. And these same policies that Obama, Reid and Pelosi are adamant that we MUST put in place before we really even know what is in there. It's no wonder the Democrats are falling apart. The House Democrats needed to "trust" the Senate Democrats, but they didn't. The people needed to trust Obama, but they don't. Too many lies. The reason that healthcare legislation hasn't been passed... The American people aren't stupid enough to believe you can add 30,000,000 people to the rolls, increase benefits, remove restrictions (pre-existing conditions, etc) and pay less for the system. The majority of people aren't that stupid. That's why the majority of people are screaming...STOP THE MADNESS. Healthcare isn't free. Stop lying.
octavio
Old news!;
We knew that the USA is a debtor country because the stinky
crooked industries like the USA health care industry,USA banking industry,USA gold mining industry,et cetera,had been
riping off,cheating the average John Doe for 40 years,100 years
et cetera ...
The republicans are coming with this article.They are desperate,they are thinking that because this article the single payer health care bill will not pass.They are wrong!.
The only way to lower health care costs is by passing the
single payer health care bill as soon as possible!.
If the banks are waiting for another government bail out ( free money ) they are going to have to wait until some body like George W Bush becomes a USA president and starts riping off
the tax payers again!.
The wealthy corporations,the filthy rich have crooked lawyers
working for them 24 hours per day looking for tax loop holes
and do not pay taxes or pay almost nothing,just because
they have a post office box in the Bahamas or Panama et cetera.
We need Tax System reform.Any body making more than $ 171,000 per year needs to be paying 91% taxes et cetera.
The crooked republican senators.Since they are a political fraud need to pay 100% tax rate!.
Stop the crooks! Stop the tax loop holes!.
akcita
I'm not sure if octavio is an absolute over-the-edge, detached-from-reality, liberal idiot, or a conservative provocateur ala Steven Colbert......
Grimmace
Yeah Single Payer, that's the ticket out of our mess! Unfortunately the health care they're trying to "deem" as passed contains no such beast.
sophia5
octavio,
If it wasn't for those "Nasty, Rich, Evil American Entrepreneurs who created
the Internet, and Evil Rich people such as Steve Jobs,
and Bill Gates, you might not be spewing your Anti-American Hatred on web
sites such as this one.
You see Octavio, the Free Market, The U.S.A., provides an environment
where people can dream, and make their dreams a reality, and dare I say
make lots of money for all their hard work, for example recent companies
such as "Facebook," and "Twitter."
Yes, there is corruption, and it should be stopped, but if you think for
one minute that a Government bought off and full of "Ethical" Corruption, is the answer to "watch over us," I've got a special deal for Louisiana, and Nebraska.
Octavio, when is the last time you were employed by a poor person.
Your vilification of the rich is a waste of time.
Why don't you try starting your own business, hire a couple people
at a decent starting wage, say $15 per hour, then one day they
show up in front the business demanding "entitlements," more pay,
more benefits, because some union thugs tell them,
they are entitled to more.
In your Socialist Collective "Utopia" everyone is the same, with
little acknowledgement of Individual Achievement, and the entrepreneurial
spirit rarely exists.
People risk their lives to make it to this country for a better life.
They're not knocking on the door of Cuba, or the Dead Soviet Union.
Octavio,
I always look forward to your "Love Letters To America."
FarLeftFist
In Sophia's fascist utopia everyone is the same with little acknowledgment of individual achievement, a society where corporations hold their workers hostage to their slavery. A society where asking for a raise or demanding better working conditions could get you fired, so the employees just suck it up and live in fear of losing their jobs for even the smallest issues. A society where the individual doesn't have a voice loud enough to demand cost of living raises, a society where workers can't strike and have their voices heard without fear. In sophia's utopia the worker would get paid $15/hr for the rest of their life and receive NO benefits or entitlements such as paid vacation, job security, health insurance, etc. A utopia where one can get fired for any reason including discrimination of any kind or even for no reason at all, and can not do anything about it. Remember, the workers/employees are the producers, the money makers, the slave working for below standard wages that makes these companies the billions of dollars in profits, they can't function or exist without US. Don't ever let them think they're doing us the favor, WE make THEM billions while they pay their workers subpar wages for doing their dirty work.
Power to the people.
SensiStar
Sophia is an idiot. She's a woman who's a Republican. When the GOP voted against giving women the same pay as a man for the same job you would think any women with a bit of common sense would run.
But here she is in all her "idiotness" still supporting the GOP. .
KC1966
Where have you been? Do a little Google search and you will find out what the rest of the world knows, "Facebook," and "Twitter" haven't made any money.
And Big businesses / corporations have never paid so little tax as they do now. They have structured structured their business so they can live tax "Frank McCourt, zero taxes". Frank is the owner of the Los Angeles Dodgers. He made $108, 000,000 between 2004 - 2009 and he paid ZERO taxes. He will also pay ZERO taxes this year. Halliburton/cheney got sick of paying taxes so they rented an office in Dubai and now pay ZERO taxes. All the while stealing 4 or 5 billion dollars a month from tax payers for Iraq & Afghanistan. If we got out of the war - that we had no dam business entering into- everyone could have free health care and it wouldn't cost a dime. The wars have cost TRILLIONS
submarinemn
I didnt realize this article was about health care. Im all for it as long as the Dems balance the budget to save our credit rating at the same time. I think th eposters here totally fail to see what the lower credit rating will lead to. Takinng money from the rich will be the least of our problems as that wont begin to solve a problem of too much government money going to the middle class. The rich will get by but take the welfare check away from a senior citizen and see how they do. You really think that if the government runs your health care as it has medicare you wil be better off? The governemt plan is bankrupt before it goes sinto effect with a lower credit rating.
hockeydog
What in the world is Charlie farting about now?
Of course we are in trouble. Everybody can see that
hyperinflation is coming down the track like a train without brakes.
This article is just more cover from Charlie's handlers like Richard Fuld, Jamie Dimon, and Lloyd Blankfein.
Although Charlie, as usual, doesn't shed any insight into anything, he still spouts what he has been told.
"Charlie, we don't care what you write, just be sure to include, 'the stock market going down on early trading', the 'rich people and companies around the globe', and be sure to put somethng in there about Geithner."
"Whatever you do, keep the focus away from our big bonuses, and don't let your adoring readers think that Richard Fuld is a bad egg."
"You are doing good, Charlie. Now go into the bathroom and pop some pimples, we will get back to you."
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olddog65
Bajoy1
The GOP is the one whose economic policy is to destroy the economy by spending and borrowing us into the poor house, and then complain that we can't afford to fix our problems because the debt is too high. How about adjusting the tax rates to reasonable levels. You know, do away with Capital Gains as a separate tax, and simply tax all those Wall Street CEO bonuses at regular income levels. While we are at it we can increase those rate to about 50% or so. That will fix the debt situation very quickly. Then in Novemeber reduce the number of Gooper Senators to say 35 and things will get better real fast. You sir are the problem and you sir are Willfully Ignorant. I pity you.
Johnnyappleseed
Not too bad for being in office for fifteen months.
Bloomy
Banjo1
Your one sick dude.
SensiStar
Didn't you get the memo. The GOP thinks your a reactionary idiot.
olddog65
Well I guess the only thing that is left to do is for the US Gov. to increase its INCOME. That means we need to adjust our Tax Code so that Warren Buffet pays a higher rate than his executive assistant. Who knows, may end up without a deficiet at all.
Johnnyappleseed
We are about to reap what we have sown.
Hows the changey thing working out for you all?
sailormoon
Without a middle class getting stronger, a growth economy, people earning to spend and pay taxes, We are a dying dinasour. There are persons in the 50"s and 60's without retirement, and without work. it will be 30 years, if we survive, to have doctors to fill the mandates. Has anyone called Jet Blue.lately.? The coolest, most efficient, hot, airline years ago???!!11/2 waiting, 5 different times. No one to help anyone. They tell you it is the weather, that they do not have enough employees, Well, I now must Tell Jet Blue, it is time for the airline to move to India and hire hundreds of persons.So they can compete, have quality service and survive.Cash and money is King. And all big fortunes have their dirty little secret. (That was said in law and order) and now those same ones who bankrupted our country are buying it up.We do not need new agencies, they did not do their jobs,the ones we have, and with our greedy govt.Oh, there is fear. real fear, in the unemployed, those who are totally unable to survive.
scott1607
Let me guess, you recently had a complaint with Jet Blue and they kept you waiting on the phone...
SensiStar
They didn't do their jobs when the GOP was in power.
You ever ask yourself why we had two bank failures and record debt under every GOP administration.
After the last 8 years I'm surprised we still have Republicans in this country.
Your policies were a total failure. Unfortunately Fox lied to you idiots again and you somehow think the economy is Obama's fault.
Sucks to be you.
GodfreydeB
GO Octavio & Olddog65!!! You lads tell the truth and the Republican politicians are brothers of LIES!!!!
sailormoon
So our govt, keeps on borrowing, the wealthy have credit, but the people on the streets were left without loans, help, credit.
dooreen
Isn't this what Osama said he was hoping to happen, the devaluation of the American dollar, and to drive the US into bankruptcy.
Johnnyappleseed
It just took another Isalmic to do it.
SensiStar
You just woke up from that coma didn't you.
JustAMom
Wow - the bond ratings companies like Moody's are paid for by Wall Street and in such cahoots with the WS Banks that they didn't even have a handle on the meltdown. So now they are threatening to downgrade the US Gov't Bond ratings (I guess as an attempt to keep Wall Street reforms from happening).
Something is really wrong both with the banking system (I am worried that the bankers think they run the country), the healthcare system (the insurance companies thing they run the country) and the political system (they definitely think they run the country) and really the American Citizens and taxpayers really run the country.
I think we need to start a voter revolt and start voting out the incumbents. Otherwise there never will be any changes in our messes and they will just keep getting worse.
"Vote out the Incumbent"
SensiStar
Nah. Just vote out the Republicans. They put the country in the ditch.
johnstafford
When it comes to reducing the U.S. deficit, the shortest distance between 2 points is to rescind (or allow to expire)
the Bush tax cuts for the rich that helped to put us in this financial hole in the first place.
=Of course, the Republicans are opposed to this. But, how much would you like to bet that, just as with the "public option" and the independent Consumer Financial Protection Agency, President Obama and the Democrats will "cave" on this too?
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