Fitch Ratings is issuing a warning on the US credit rating, should we default on our debt. They even threaten the rating if we continue to pay the interest on the bonds we've sold. That's a curious statement, but even more curious is the timing. It couldn't have come at a better time for Obama. Was it Fitch's way of saying I'm sorry for January's warning that we need to rein in the Obama deficits or your credit will be downgraded?
Let's look at some facts. The S&P downgraded US credit to AA+ in 2011 because of the wild spending and huge deficit coming out of the White House. They even had the audacity to blame the downgrade on runaway spending by Obama.
Suddenly, the Department of Justice is suing the S&P over the fact that had rated the mortgage backed securities at AAA. Moody's and Fitch also rated the bonds AAA and yet they have not been persecuted, but then again neither downgraded US credit.
Egan-Jones, a smaller ratings agency, also downgraded US credit and the SEC took the unprecedented step of forbidding them to rate certain securities, seriously affecting their bottom line. It's the Chicago way. Fear and intimidation are always the order of the day in the Obama White House.
John Berlau, an economist at the free market Competitive Enterprise Institute, is very curious about the timing of their announcement too, since no other rating agency see it as a problem.
“My question is ‘Why now? I just have that one statement by Fitch to go on, but no other credit rating agency seems to think the debt ceiling drama by itself merits a downgrade.”
“It’s not inconceivable — and I can’t prove this — that Fitch is trying to get in good with the Obama administration by threatening to do a [downgrade] to help the administration in the debt ceiling hike, but not actually doing a downgrade.”
Berlau also suggests that Fitch could just be paying it forward, in case they have to lower the credit rating in the future. He sees an administration based on fear and intimidation.
“There’s a pattern of intimidation of credit rating agencies, both [bigger] and smaller ones. There’s a pattern of prosecution of those that don’t toe the administration’s line and will hammer the administration on spending and debt.”
Berlau doesn't think a downgrade is all that serious a threat to the ecomy anyway.
“So what if it’s downgraded from AAA to AA+? So the government has to pay a little more for borrowing. Well, then the government couldn’t spend as much. Is that a bad thing?”