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U.S. Ratings Agencies Are Hobbled In Rating the USA

Moody's has affirmed America's AAA rating as "stable." That is what we would call a "bad" endorsement.

Moody's (and to a lesser extent Standard and Poors) was primarily responsible, not for the credit crisis itself, but for the credit RATING crisis. This was a company that failed to downgrade Enron until it was too late, the monolines until it was too late, and subprime structures until it was too late.

Standard and Poor's has been more measured, issuing a warning about the United Kingdom, and indirectly putting American investors on notice as well. Although they won't come right out and say it.

In a discussion with a senior ratings Moody's officer early in 2007, the officer conceded that his agency had considered everything up to, but not incluidng a 1930s type scenario. When asked a similar question, Standard and Poors answered that they had INCLUDED the 1930s in their thinking.

Clearly, one of the two agencies is a little better than the other. Even so, you need to "read between the lines" to get "straight talk" from them about America's problems.