WBEZ | credit rating http://www.wbez.org/tags/credit-rating Latest from WBEZ Chicago Public Radio en Illinois plans $800 million bond sale http://www.wbez.org/story/illinois-plans-800-million-bond-sale-95279 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2012-January/2012-01-04/6289910064_3cfefc8825.jpg" alt="" /><p><p>The state of Illinois is hoping investors will snap up $800 million worth of bonds next week. The investment world has not looked kindly on Illinois bonds in recent years as the state has struggled with a mountain of debt. Moody’s rates Illinois bonds the worst in the country, tied with California, and Standard &amp; Poor’s rates the state second-worst.</p><p>But Illinois’s director of capital markets, John Sinsheimer, said he’s hopeful lots of investors will be interested in these bonds.</p><p>"We’ve seen a lot of changes in the state and its finances to the good, with the tax increases that were approved last year, so we would anticipate the bonds will be well bid," Sinsheimer said.</p><p>The state plans to use the money from next week’s sale for capital projects like building schools and fixing roads. Sinsheimer said Illinois will sell another round of bonds in March.</p></p> Wed, 04 Jan 2012 19:12:00 -0600 http://www.wbez.org/story/illinois-plans-800-million-bond-sale-95279 Stocks tumble following S&P downgrade of U.S. credit rating http://www.wbez.org/story/stocks-tumble-following-sp-downgrade-us-credit-rating-90245 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-August/2011-08-08/Wall St Sign_Flickr_Alex E. Proimos.jpg" alt="" /><p><p><strong>Updated 8/8/11 at 4:00p.m.CT</strong></p><p>The Dow Jones Industrial Average posted one of its biggest single day losses in history Monday as the Dow dipped below the 11,000 mark for the first time since October, 2010.&nbsp;</p><p>Similar declines were posted on the S&amp;P 500 and the Nasdaq, each of which fell by more than 6 percent.&nbsp;&nbsp;</p><p>The declines capped a 24-hour rout in global markets in the first official trading day after Standard &amp; Poor's downgraded the U.S. credit rating for the first time.</p><p>S&amp;P cut the long-term debt rating for the U.S. by one notch late Friday. The downgrade wasn't unexpected, but it comes when investors are already nervous about a weak U.S. economy, European debt problems and Japan's recovery from its March earthquake.</p><p>Prices for Treasurys rose because they're still seen as one of the few safe investments. Gold topped a record $1,700 per ounce for the first time.</p><p>Asian and European stocks also were down Monday. The downgrade of U.S. debt is overshadowing bond purchases that the European Central bank is making to help Italy and Spain avoid defaulting on their debts.</p><p><strong>Obama seeks to calm markets</strong></p><p>President Barack Obama says the U.S. always is and always has been a AAA country, despite its rating agency downgrade. He said also the U.S. didn't need a rating agency to tell it that its political system was having trouble functioning.</p><p>Speaking at the White House on the Standard &amp; Poor's downgrade, Obama renewed a plea to Congress to take action in September of help create jobs and cushion Americans from a still weak economy.</p><p>Obama said financial markets around the world "still believe our credit is AAA. I and the world's investor's agree."</p><p><strong>Assessing the meaning of the S&amp;P downgrade</strong></p><p>The ratings downgrade announced late Friday came after the Dow Jones industrial average had recorded its worst week since 2009. A managing director at Standard &amp; Poor's said Monday that he has absolutely no second thoughts about the credit ratings agency's decision to cut the U.S. debt rating.</p><p>With global stocks sinking early in the day, S&amp;P's David Beers said on ABC's <em>Good Morning America </em>Monday that the agency's decision was based on several factors, including damage done to the U.S. reputation over the controversy surrounding the debt ceiling and concerns that underlying public finances are on an unsustainable path.</p><p>Asked if he had any second thoughts about the downgrade, Beers said "absolutely not."</p><p>While much has been made about the Treasury Department's claim that S&amp;P acted on an analysis that had a $2 trillion error, Beers rebuffed the notion during an appearance on CNN. "This idea that we made a $2 trillion error is simply a smoke screen for the unhappiness about our decision," he said.</p><p>Beers did seem to try to alleviate concern about the downgrade, saying it was "a very small diminution, if you like, in the credit standing of the United States."</p><p>"This is not a catastrophic decline in the U.S.'s credit-worthiness," he added.</p><p>S&amp;P downgraded the U.S. rating for the first time Friday, cutting the rating to AA+ from AAA. Two other ratings agencies - Moody's and Fitch - are for now keeping the AAA rating for U.S. debt.</p><p><strong>Impact on state and municipal debt</strong></p><p>Officials at Standard &amp; Poor's say they plan to indicate how local and state governments, Fannie Mae and Freddie Mac, and insurers will be affected by the rating agency's downgrade of long-term U.S. debt.</p><p>S&amp;P officials told reporters Monday that the agency is looking at key sectors that are linked to the U.S. debt, and will announce "shortly" how those ratings might be affected.</p><p>The officials did not name any specific governments or insurance groups. But they said AAA-rated insurance groups, government-sponsored enterprises and state and local governments affected by possible consolidation of programs in Washington would likely be reviewed.</p><p><strong>Fed meeting Tuesday</strong></p><p>Meanwhile, a regular meeting of the Federal Reserve Board's Federal Open Market Committee is scheduled for Tuesday.&nbsp; While most analysts don't expect the Fed to take any action during the meeting, many will be closely watching comments from Fed chairman Ben Bernanke following the meeting for clues about future monetary policy.</p></p> Mon, 08 Aug 2011 13:32:00 -0500 http://www.wbez.org/story/stocks-tumble-following-sp-downgrade-us-credit-rating-90245 Bitterness all around after U.S. credit downgrade http://www.wbez.org/story/2011-08-06/bitterness-all-around-after-us-credit-downgrade-90217 <p><p>Republicans and Democrats quickly doled out blame to each other and China weighed in angrily after the first-ever downgrade in America's sterling credit rating — an expected but unsettling move that further clouds prospects for the recovery of the fragile U.S. economy.</p><p>The back and forth came after Standard & Poor's, one of the world's three major credit rating agencies, cited "difficulties in bridging the gulf between political parties" as a major reason for the downgrade from U.S.'s top shelf AAA status to AA+, the next level down. The rating agency has essentially lost faith in Washington's ability to work together to address its debt.</p><p>The downgrade, hours after markets closed on Friday, is a first for the United States since it was granted an AAA rating in 1917. S&P warned about a downgrade as far back as April. Its decision came just four days after fractious debate over raising the nation's debt ceiling ended in a compromise that would reduce the country's debt by more than $2 trillion. S&P said Friday the deal did not go far enough.</p><p>The S&P stayed agnostic on the question of whether larger deficit reductions should come from spending cuts or revenue increases, NPR's Tamara Keith said on Weekend Edition Saturday. The rating agency's statement, she said, talks about the need to address both entitlements as well as revenues. That didn't stop lawmakers from shoring up party lines.</p><p><strong>Partisanship Warning Inspires More Partisanship</strong></p><p>Both political parties used S&P's report to buffet their policy cases and attack the other side.</p><p>House Speaker John Boehner (R-OH), said he hoped the downgrade served as a wake-up call to the Democratic Party.</p><p>"It is my hope this wake-up call will convince Washington Democrats that they can no longer afford to tinker around the edges of our long-term debt problem," Boehner said in a statement. "As S&P noted, reforming and preserving our entitlement programs is the `key to long-term fiscal sustainability."</p><p>Senate Majority Leader Harry Reid (D-NV), while not calling out Republicans by name, said S&P's action showed that Democrats preferred policy approach — a mix of raising taxes and budget cuts — was the correct way to move forward.</p><p>"The action by S&P reaffirms the need for a balanced approach to deficit reduction that combines spending cuts with revenue-raising measures like closing taxpayer-funded giveaways to billionaires, oil companies and corporate jet owners," Reid said.</p><p>At least one senator, Republican Mark Kirk of Illinois, called for the president to bring Congress back from its August recess to try and address the issues raised by S&P's report.</p><p>Potential opponents of the president in 2012 pounced on S&P's announcement.</p><p>Rep. Michele Bachmann (R-MN)., a Tea Party favorite, called on Obama to fire Geithner and quickly submit a plan to balance the budget, not just reduce deficits. Former Massachusetts Gov. Mitt Romney said the credit downgrade was the "latest casualty" in Obama's failed economic leadership</p><p><strong>The White House Fumes, Silently</strong></p><p>The White House remained mum on the downgrade early Saturday. President Barack Obama met with Treasury Secretary Timothy Geithner in the Oval Office late Friday afternoon before leaving for a weekend at Camp David.</p><p>S&P's decision, though, clearly angered the Obama administration. Officials at the Treasury Department fought the downgrade until virtually the last minute. Administration sources familiar with discussions said the S&P analysis was fundamentally flawed. They spoke on condition of anonymity because they weren't authorized to discuss the matter publicly.</p><p>S&P had sent the administration a draft document in the early afternoon Friday and the administration, after examining the numbers, challenged the analysis.</p><p>In a statement, Treasury said, "A judgment flawed by a $2 trillion error speaks for itself."</p><p><strong>China's Angry, But Options Are Limited</strong></p><p>China, the largest foreign holder of U.S. debt, voiced its displeasure through Xinhua, the government's official news service on Saturday. In a commentary, it demanded America address its "addiction to debts" and could no longer borrow its way out of messes.</p><p>The tone was that of an investor ripping into a company's board of directors, NPR's Frank Langfit said on Weekend Edition Saturday. However, he added, a better indication of China's political reaction will come from top leaders like President Hu Jintao.</p><p>China holds an estimated $2 trillion in U.S. debt, and the common fear is that China may try to sell some of those securities. Langfitt said Chinese economists he's talked to say the country may continue to diversify away from U.S. treasuries, but that China's actually caught in a bit of a trap itself.</p><p>"If China were to try to dump treasuries, the price is going to drop," Langfitt said. "It's basic supply and demand. You put a lot out there — the price is going to go down if supply goes way up, and that's going to hurt the value of their remaining assets."</p><p>There's another reason China might hesitate to sell off its U.S. debt. "The more dollars they sell on the market, the dollar falls," Langfitt said. "Chinese currency would then become relatively more expensive and that would make Chinese exports more expensive on the world market. They're very concerned about their exports; it's very important in terms of their domestic employment."</p><p>Asian markets will be the first to open on Monday. "Everybody around the world's going to be watching to see how they react to this," Langfitt said. "There's fears that — again — it could get pretty messy."</p><p><strong>As For The U.S. Economy...</strong></p><p>Whether the downgrade will have a more tangible impact on the economic outlook remains to be seen.</p><p>Though widely predicted, S&P's decision comes at a time when investors already appear spooked by U.S. economic indicators and debt troubles in Europe. The Dow Jones Industrial average fell 699 points this week, the most since the height of the financial crisis in October 2008.</p><p>Regulators and the Federal Reserve issued a statement designed to calm investors, saying that the downgrade shouldn't impact U.S.-guaranteed investments. The statement sought to ensure that banks understood the downgrade would not affect the amount of money that regulators require banks to hold onto against possible losses.</p><p>If this week is any indication, S&P's decision is unlikely to have an impact on how the United States finances its borrowing, through the sale of government-backed bonds, bills and notes.</p><p>The two other major credit ratings agencies, Moody's and Fitch, have not downgraded U.S. debt. Earlier this week they said that for now they were staying put at an AAA rating.</p><p>"Investors have voted and are saying the U.S. is going to pay them," said Mark Zandi, chief economist of Moody's Analytics. "U.S. Treasuries are still the gold standard. <div class="fullattribution">Copyright 2011 National Public Radio. <img src="http://metrics.npr.org/b/ss/nprapidev/5/1312655539?&gn=Bitterness+All+Around+After+U.S.+Credit+Downgrade&ev=event2&ch=1017&h1=Asia,Economy,Politics,Business,World,U.S.,Home+Page+Top+Stories,News&c3=D%3Dgn&v3=D%3Dgn&c4=139050802&c7=1017&v7=D%3Dc7&c18=1017&v18=D%3Dc18&c19=20110806&v19=D%3Dc19&c20=1&v20=D%3Dc20&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Sat, 06 Aug 2011 13:21:00 -0500 http://www.wbez.org/story/2011-08-06/bitterness-all-around-after-us-credit-downgrade-90217 Joining Fitch, Moody's also affirms U.S. credit rating http://www.wbez.org/story/2011-08-03/joining-fitch-moodys-also-affirms-us-credit-rating-90036 <p><p>Echoing what <a href="http://www.npr.org/blogs/thetwo-way/2011/08/02/138929355/in-light-of-budget-deal-fitch-ratings-says-u-s-keeps-triple-a-rating">Fitch Ratings said yesterday</a>, Moody's Investor Service said it is keeping a triple-A credit rating for the United States. <a href="http://abcnews.go.com/Business/us-debt-rating-economists-wait-hear-sp/story?id=14212335">Bloomberg reports</a> that the announcement also came with a warning that a downgrade is still possible if the country doesn't take on debt reduction:</p><p><blockquote></p><p>The outlook for the U.S. grade is now negative, Moody's said in a statement yesterday after President <a href="http://topics.bloomberg.com/barack-obama/">Barack Obama</a> signed into law a plan to lift the nation's borrowing limit and cut spending following months of wrangling between Democratic leaders and Republican lawmakers.</p><p>The compromise "is a positive step toward reducing the future path of the deficit and the debt levels," <a href="http://topics.bloomberg.com/steven-hess/">Steven Hess</a>, senior credit officer at Moody's in New York, said in a telephone interview yesterday. "We do think more needs to be done to ensure a reduction in the debt to GDP ratio, for example, going forward."</p><p></blockquote></p><p>During the debt ceiling debate, all three major ratings agencies warned the U.S. that if it did not raise the debt ceiling and enact a deficit-cutting budget, it faced a downgrade of its triple-A credit rating.</p><p>Now, the only agency that hasn't made a statement after the budget deal was enacted by President Obama, yesterday, is S&P.</p><p><strong>Update at 7:54 p.m. Chinese Agency Cuts U.S. Rating: </strong></p><p>Dagong Global Credit Rating, which Reuters calls a "a relative newcomer to sovereign debt rating realm and little known outside of China," announced that it was downgrading the United States' rating from A-plus to A.<a href="http://in.reuters.com/article/2011/08/03/idINIndia-58591220110803"> Reuters reports</a>:</p><p><blockquote></p><p>It said the deal reached by Congress and signed into law by President Barack Obama may further erode the country's debt paying ability in the coming years, and the agency issued a negative outlook for the United States.</p><p></blockquote> <div class="fullattribution">Copyright 2011 National Public Radio. <img src="http://metrics.npr.org/b/ss/nprapidev/5/1312382364?&gn=Joining+Fitch%2C+Moody%27s+Also+Affirms+U.S.+Credit+Rating&ev=event2&ch=103943429&h1=National+News,Economy,The+Two-Way,Business,News&c3=D%3Dgn&v3=D%3Dgn&c4=138948269&c7=1017&v7=D%3Dc7&c18=1017&v18=D%3Dc18&c19=20110803&v19=D%3Dc19&c20=1&v20=D%3Dc20&c31=127602855,127602331,103943429&v31=D%3Dc31&c45=MDA0OTc2MjAwMDEyNjk0NDE4OTI2NmUwNQ001"/></div></p></p> Wed, 03 Aug 2011 06:40:00 -0500 http://www.wbez.org/story/2011-08-03/joining-fitch-moodys-also-affirms-us-credit-rating-90036 Kirk warns of S&P rating of U.S. government http://www.wbez.org/story/kirk-warns-sp-rating-us-government-85483 <img typeof="foaf:Image" src="http://llnw.wbez.org/story/photo/2011-April/2011-04-21/P1000608.JPG" alt="" /><p><p>Illinois Republicans say the United States needs to change its economic policies. The credit agency Standard &amp; Poor warns the U.S. government could lose its top credit rating in the next two years if lawmakers don't make a long-term plan to lower the deficit.</p><p>U.S. Sen. Mark Kirk, R-Illinois, said the country's credit rating could hurt local businesses. He said foreign banks could think there is more risk doing business with American companies and the banks could raise rates.</p><p>"This is an official warning call to the American government and the American people that we have to change course," Kirk said.</p><p>Kirk said the U.S. should learn from European countries whose governments suffered from an economic crisis,&nbsp; like Greece and Ireland.</p></p> Thu, 21 Apr 2011 12:05:00 -0500 http://www.wbez.org/story/kirk-warns-sp-rating-us-government-85483 Illinois' debt burdens 5th highest in nation http://www.wbez.org/story/credit-rating/illinois-debt-burdens-5th-highest-nation <p><p><span style="font-size: 10pt; color: black;">A new report ranks Illinois fifth in the nation for having the largest combined pension and debt burdens per capita. The Moody's Investors Service report attempts to hone in on how pension liabilities will affect credit ratings. The report looks at metrics such as personal income, Gross Domestic Product, and debt as a percentage of state revenue to figure out state by state debt burdens. </span></p> <div><span style="font-size: 10pt; color: black;">Robyn Prunty is an Illinois analyst with a different credit rating service, Standard and Poor&rsquo;s.&nbsp;</span><span style="font-size: 10pt; color: black;">She says that company is keeping a close eye on the state's finances, but isn't sure whether Illinois will receive a credit downgrade. </span></div><div>&nbsp;</div><div><span style="font-size: 10pt; color: black;">&ldquo;The rating's not directly tied to pensions,&ldquo; she said, &ldquo;There's many other factors that we use in establishing our ratings. But certainly pensions have been a significant focus for Illinois.&rdquo;</span></div> <div>&nbsp;</div> <div><span style="font-size: 10pt; color: black;">Joshua Rauh is a professor of Finance at Northwestern&rsquo;s Kellogg School of Business. He is concerned that government accounting standards across the country grossly understate pension liabilities. Rauh said the methods endorsed by Government Accounting Standards Board are not endorsed by the majority of finance economists. According to Moody&rsquo;s report, Illinois debt burden per capita is close to $7,000, but Rauh said, &ldquo;What you find is Illinois actually has unfunded pension liabilities alone of over $200 billion. This adds up to an unfunded liability of over $40,000 per household.&rdquo; &nbsp;</span></div> <div>&nbsp;</div> <div><span style="font-size: 10pt; color: black;">Moody's ranking comes just after a recent Security and Exchange Commission&rsquo;s inquiry into claims Illinois officials made about savings resulting from recent pension reform. The SEC is looking into whether expected savings from recently passed legislation are accurate. Illinois officials are planning on selling off $3.7 billion in bonds on February 17th to cover this year&rsquo;s pension payment.&nbsp;</span></div></p> Fri, 28 Jan 2011 21:53:00 -0600 http://www.wbez.org/story/credit-rating/illinois-debt-burdens-5th-highest-nation