Blumenthal: Credit Downgrade Casts Doubt on S&P's Credibility

U.S. Sen. Richard Blumenthal said in an interview Monday that Standard & Poor’s downgrade rating of the U.S. Treasury bonds from AAA status to AA+ has more to do with the “credibility” of the credit rating agency than the strength and stability of the bonds.

This, added the junior senator from Connecticut, is the same agency that gave great ratings to those very bonds before the economic meltdown in 2008.

“The downgrade of U.S. Treasury bonds by one of the rating agencies, S&P, certainly undermines and adds greater doubt about the credibility and integrity of that rating agency, and maybe some of the others who participated... in overrating (and) giving triple AAAs to the bonds that were backed by mortgages that became worthless," Blumenthal said following a visit to Naugatuck Valley Community College.

Since the credit rating downgrade on Friday the Stock Market saw sharp declines in the Nasdaq and Dow Jones, according to reports from the New York Times and Wall Street Journal. The Huffington Post reported that S&P has also begun downgrading ratings for agencies that are linked to the federal government, such as Fannie Mae and Freddie Mac.

Blumenthal, who was elected to serve in the U.S. Senate this year, once sued S&P when he was attorney general. According to a press release, the former attorney general said both “Moody’s (another credit rating agency) and S&P’s alleged misconduct enabled the worst economic downturn in the nation since The Great Depression.”

The backlash from Friday’s credit downgrade is being played out in the political arena. News agencies reported Monday the back-and-forth finger-pointing on the issue between Democratic and Republican lawmakers, as well as the administration of President Barack Obama.

One Republican, Arizona Sen. John McCain, who was quoted on Foxnews.com as saying, “I agree that there is dysfunction in our system, and a lot of it has to do with the failure of the president of the United States to lead.”

Meanwhile, members of the Obama administration, such as Treasury Secretary Timothy Geithner, was quoted in an Associated Press article as saying, "(S&P) handled themselves very poorly. And they've shown a stunning lack of knowledge about the basic U.S. fiscal budget math.”

Saying he has been “appalled” by the gridlock in the political arena in Washington, Blumenthal said, “We do need to do more about our debt and our deficit, the size of government and spending needs to be reigned in and reduced.”

“We face a difficult fiscal problem in this country and we need to address it and do it by reducing spending and increasing revenue; it has to be balanced approach,” he said. “And I am hopeful that the country will come together and most importantly Congress will put aside some of the partisan differences.”

Note: This report first appeared in the Naugatuck Patch.