Weiss Credits S&P but says rating should be lower

Weiss Ratings credits S&P for taking an important first step in the right direction for its downgrade of US credit. However, they do not feel that the one notch downgrade truly represents what the rating should be at for the United States.

Monday, August 08, 2011
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Weiss Ratings Credits S&P for Important First Step; Renews Challenge to Moody's and Fitch to Downgrade U.S. Debt

JUPITER, Florida (August 8, 2011) — Weiss Ratings, the nation’s leading independent rating agency of U.S. financial institutions, credits Standard & Poor’s for taking an important first step in the right direction, while renewing its public challenge to Moody’s and Fitch to downgrade the long-term debt of the U.S. government.

The Weiss Ratings Challenge, reissued today, was initially made to all three credit rating agencies on May 10, 2010, or 15 months before S&P announced its downgrade of U.S. debt from AAA to AA+ last Friday.

Weiss Ratings president Dr. Martin D. Weiss commented: “S&P deserves credit for breaking with nearly a century of precedent and focusing the world’s attention on the urgency of this problem. However, we do not believe a one-notch downgrade adequately reflects the rapid deterioration of the nation’s finances since the debt crisis of 2008.”

Although a downgrade can have negative short-term repercussions, Weiss believes the consequences of procrastination can be far more serious, while an honest rating can be constructive for the country in the long term. Addressing the major credit rating agencies, he wrote:

“To the degree that you continue to reaffirm stellar ratings for U.S. debt, you help entice millions of hard-working citizens, retirees, and their intermediaries to pour more money into a potential debt trap; or at best, to be severely underpaid for the actual risks they are taking. You give policymakers a green light to perpetuate their fiscal follies, further degrading our government's ability to meet future obligations. And you help create a false sense of security overall — the recipe for a possible meltdown in the market for U.S. sovereign debts.”

On April 28, 2011, 15 months after issuing its initial challenge to the major ratings agencies, Weiss Ratings introduced the Weiss Sovereign Debt Ratings, giving the United States a grade of C, and subsequently, with its release of July 15, 2011, Weiss Ratings downgraded U.S. debt to C- (approximately equivalent to a BBB- at S&P).

Weiss Ratings senior financial analyst Gavin Magor commented: “The U.S. is facing some of its greatest financial challenges of modern times, while global investors continue to take very substantial risks when buying medium- and long-term U.S. government securities. These include the risks of currency devaluation, reduced bond market liquidity, bond price declines, and rapidly escalating costs of insuring against a possible future default.”

Today, Weiss Ratings reaffirmed its C- rating of U.S. medium- and long-term debt. Among the 49 sovereign nations covered, the United States continues to score very low in terms of its debt burdens, macro-economic trends, and international stability, while still getting a relatively high grade for the broad acceptance and marketability of its debt securities.

About Weiss Ratings

Weiss Ratings is the nation’s leading independent provider of bank, credit union and insurance company financial strength ratings, accepting no payments for its ratings from rated institutions. Weiss Ratings also provides debt ratings on 49 sovereign nations.

By adhering to its independent business model, Weiss outperformed Standard and Poor’s, Moody’s, A.M. Best and Duff & Phelps (now Fitch) in warning of future life and health insurance company failures, according to a 1994 study by the U.S. Government Accountability Office (GAO). Similarly, Weiss was the only one to identify, in advance, nearly all major banks that failed or required a federal bailout in the 2008 debt crisis.

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