BOSTON (TheStreet) -- Standard & Poor's rating analysts placed the blame for the U.S. sovereign credit rating downgrade -- to AA+ plus from its highest rating, AAA -- squarely at the feet of the nation's political leaders, with the nation's slowing economic growth and spiraling debt also playing a role, in a conference call this morning.
"The primary focus remained on the current level of debt, the trajectory of debt as a share of the economy and the lack of apparent willingness of elected officials as a group to deal with the U.S. medium term fiscal outlook," formed the basis for S&P's action, the firm said in a statement Friday, a standpoint that was reiterated on the call by S&P analysts.
"The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges," a weakening that has accelerated since S&P telegraphed its concerns about the nation's fiscal health when it assigned a negative outlook to the nation's then AAA rating on April 18.
John Chambers, head of S&P's sovereign ratings committee, in New York, and David Beers, global head of S&P's sovereign and international public finance ratings, in London hosted the conference call Monday morning.
Key takeaways from S&P's conference call were:
: Chambers said that the nation's political leadership "is not as strong as some of the highest-rated countries" that it rates.
"The debacle about raising the debt ceiling is one illustration of that, but more profoundly, elected officials across the political spectrum are unable to proactively put U.S. public finance on a sustainable footing as are some of our most highly-rated governments," he said.
S&P tracks the sovereign debt of 126 countries.
: "We believe the U.S. dollar will remain the key international currency," Chambers said, adding that the relative strength of the U.S. dollar "had no role in the downgrade."
IMPACT ON OTHER ASSET CLASSES
: S&P is reviewing the potential impact of the downgrade on government sponsored entities, such as
, as well as AAA-rated insurance groups and some financial clearing houses, the analysts said.
It is also reviewing the potential impact on the budgets of state and local governments given the need for "fiscal consolidation programs" which could impact their credit ratings.
S&P is scheduled to publish a report later today along with possible rating actions on those sectors.
IMPACT ON EQUITIES AND BONDS
: When asked about the "concept of forced selling" on Wall Street, Chambers said that in their discussions with investors and money managers "most say they think there will be little forced selling today."
Beers said that S&P' analysts expect that the corporate bond sector will see no immediate impact and "will be the least affected of all" investment sectors.
REGAINING TRIPLE-A RATING
: Beers said he expects the rating to remain in effect for at least the next 6 to 24 months and there is considerable downside risk, if Congress fails to come up with the cuts to meet the goals it set in its debt ceiling agreement of last week and doesn't let current tax cuts lapse as they are scheduled to in 2012 and later.
For the rating to "slip lower, it would take greater fiscal slippage than we currently anticipate," he said, adding that given the projected continued growth of U.S. debt and the political polarization about how to address the problem "we don't' see anything immediately on the horizon to (result in an) upgrade to triple-A," hence S&P's long-term negative rating on the debt.
CHANCE OF DEFAULT
: Chambers said that S&P has never seen a default in sovereign debt that it has rated A, AA, or AAA, in its 15 years of providing such ratings, so "there is little chance."
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