Now that Standard & Poor’s has downgraded America’s government credit rating, the real questions everyone should be asking are: What took them so long, and why haven’t Moody’s and Fitch done so as well?
If the U.S. government were not a “sovereign†but a firm, it would have been downgraded long ago. And were this decision in the hands of a political institution — say, the International Monetary Fund — we might still be waiting for a realistic diagnosis. But, thankfully, private entities — even those who, like S&P, have been granted a degree of privilege by the government — must deal with reality, not the pipe dreams of our politicians.
Thank goodness that the upstart smaller credit rating agencies seem to have forced S&P’s hand. Egan-Jones Rating Co. and Weiss Ratings had already looked at the numbers and downgraded U.S. debt earlier this year. These firms are gaining a foothold as the Securities and Exchange Commission, prodded by the bipartisan Credit Rating Agency Reform Act of 2006, has approved a handful of new firms as “nationally recognized statistical rating organizations†to compete with what had long been the government-protected cartel of the “Big 3.â€
