Moody’s Will Cut 7,000 Top-Rated Munis If U.S. Downgraded, Reviewing More

I just found this article and wanted to share it with everyone.I am
still trying to wrap my mind around all of the implications of this.

Here is the link

www.bloomberg.com...


Here is a snippet from the article

At least 7,000 top-rated municipal credits would have their ratings cut if the U.S. government loses its Aaa grade, Moody’s Investors Service said.

An “automatic” downgrade affecting $130 billion in municipal debt directly linked to the U.S. would occur if the federal level is reduced, Moody’s said yesterday in a report. Additionally, top-rated securities with no direct links to the national government will be reviewed for similar action.

Municipal debt including mortgage-backed bonds secured by the U.S. or agencies such as Fannie Mae and Freddie Mac, would be trimmed with the federal government, Moody’s said. It didn’t provide a total value for other state and local credits that may be affected, including housing authorities and nonprofits.

What are your thoughts?

reply to post by PatriotsPride


Thoughts on what?

Thoughts on fear mongering the masses into believing that raising the debt ceiling is the only way out?

Nah, that ain't me.

We don't go with thoughts on this issue
We are going on raw feelings and political talking points...thoughts are what we elect politicians to do for us.

I was told by my political master that we must raise the debt ceiling, else zombies will attack us...but my brothers political master said we must not raise the debt ceiling, doing so will make zombies attack us.

So, I am flipping a quarter.

It must be a crime on this site to ask what people think about something.
I don't think that Moody's is fear mongering,I sure as hell am not,it would
not surprise me on bit that by the end of next week,they will have downgraded
our rating.We will find out soon enough.

Originally posted by PatriotsPride
What are your thoughts?

If they downgrade the US credit rating then what this story indicates is that it will have a ripple effect. The immediate impact of the downgrade would be that interest rates will have to raise in order to attract skiddish investors back into buying US debt. If you're a muni bond fund holder this could actually be good news because the interest your bonds bring in will get higher. The bad news is that higher interest rates will likely stall the "recovery" (if we can really call it that) and might even push us into recession. And that's just related to the credit rating, the debt default will have its own ramifications. If we get both together, well it ain't gonna be pretty.

It makes sense really. If they downgrade the US Aaa status, then by doing so everything that is sponsored by, or funded by the US would also have to have an equal or greater downgrade. This doesn't surprise me really, what will surprise me is if they actually make good on their threat.

reply to post by SpaDe_


I do not think they are bull s****ing.

reply to post by SaturnFX


My only political master is my human decency radar.

I can't stand these &'(%% rating agencies they add zero value to anything and serve only to provide window-dressing that nobody even believes in anymore.

Still lots of fundraisers work according to these braindead algorithms cooked up on graph paper back in 1970s or something that tell them all these "if-then" scenarios. And man go like: "if US rating is cut by such-and-such an anount, respond in this way" (with the usual response being selling or liquidation of some sort).

Now, here we see market idiocy...nobody trusts Moodys, and yet everyone has to take them into account because of Game Theory and these stupid little "if-then" protocols that will kick in and send huge amounts of money lumbering hither and thither and probably screwing things up and causing general chaos and havoc.

What needs to happen is we need to ditch this stupid ratings-agency system and find another way of regulating things. If it hasn't happened yet (and it hasn't) after the worst financial crisis since the depression, I have no reason to think people will wise up spontaneously.

By the way, did you guys see this the other day? Looks like China has already had enough:

Chinese rating agency strips Western nations of AAA status: London Telegraph