S&P Downgrade of U.S. Credit Rating: Initial Perspectives

According to S&P, the downgrade reflects their opinion that the fiscal plan approved by Congress and signed into law by President Obama falls short of what, in S&P’s view, would be necessary to stabilize the government’s medium-term debt situation. Additionally, S&P stated that the effectiveness and stability of American policymaking and political institutions have weakened at a time when persistent fiscal and economic challenges have continued to grow. In this issue of M Financial's Due Care Bulletin we look at the immediate impact and the NAIC's View of the decision.

The rationale of S&P's decision is outlined in a supplemental newsletter: M Wealth Perspectives newsletter. In it, S&P emphasized their concern regarding the ineffectiveness of Congress to deal with the debt issue on a forward looking basis, as opposed to concerns with regard to being able to service the debt in the near term. Further indication of this position is that they did not downgrade the rating of short-term Treasury Bills, which remain at A-1+.



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