NYT Downplays Downgrade: ‘Experts Say the Fallout Could be Modest’
Ever the dutiful Obama shills, the New York Times on Saturday downplayed the seriousness of the announcement by Standand and Poor's that it had downgraded America's debt rating to AA+. As you read this, imagine how this front page article would have differed if a Republican was in the White House: Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications. That was the opening paragraph. Can you imagine if George W. Bush was still president Times authors saying in the very first sentence of a front page article this downgrade is “freighted with symbolic significance but carries few clear financial implications?” Seems a metaphysical certitude the opening paragraph would have painted a picture of a financial calamity the likes of which had never been seen in this country. Remember that for almost a month, the press have been hyperventilating about the need to raise the debt ceiling to avoid the unthinkable consequences of a downgrade. Now that it's happened, it's no big deal: [M]any analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time. On the other hand, S.& P. is acting in the face of evidence that investors consider Treasuries among the safest investments in the world. Yields rose before the Congressional deal on fears of default and a possible downgrade. But after a deal was struck, yields sank as money poured into Treasuries as a safe haven from sharply falling stocks and the turmoil of the European debt markets. Notice the Times is now using the same argument conservatives have for the past several weeks claiming that despite the hysterical fears of a default being fostered by America's press, Treasuries have been rising in price showing investors quite confident in their safety. It would have been nice if the Times had so effectively quelled readers' fears as the debt ceiling debate was ensuing rather than after the fact. But with shills like these, the end justifies the means: Experts say the fallout could be modest. [B]ecause Treasury bonds have always been considered perfectly safe, many rules prohibiting institutions from investing in riskier securities are written as if there were no possibility that the credit rating of Treasuries would be less than stellar. Banking regulations, for example, accord Treasuries a special status that is not contingent on their rating. The Fed affirmed that status in guidance issued to banks on Friday night. Some investment funds, too, often treat Treasuries as a separate asset category, so that there is no need to sell Treasuries simply because they are no longer rated AAA. In addition, downgrade of long-term Treasury bonds does not affect the short-term federal debt widely held by money market mutual funds. In other words, almost no one would be precluded from investing in federal debt, and even the ratings agencies have concluded that few investors would walk away voluntarily. In essence, there's nothing to see here. Move along. Think this would have been the tenor of this piece if a Republican was in the White House, or would the Times have painted a picture so dire that Americans might be heading to their banks right now to withdraw all of their funds before the collapse being presaged occurs?
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NYT Downplays Downgrade: ‘Experts Say the Fallout Could be Modest’
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on August 6, 2011. Filed under