Danger of a US Credit Rating Downgrade

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October 14 (Bloomberg) -- Kroll Bond Rating President and Coo James Nadler speaks with Bloomberg’s Tom Keene and Sara Eisen on how the government shutdown could effect a credit rating.

The last time we saw the fight over the debt ceiling, standard and poors stripped the u.s. of the aaa credit rating.

Do they face another cut this time around?

Jim adler joins us now to talk about america's pristine aaa rating.

Do we deserve it?

We do.

The u.s. was, is, and remains the world reserve currency.

October 18 it will be the world reserve currency.

Investors still demand u.s. securities as a safe haven.

We saw that when the downgrade happened.

Do they remain there when we cannot pass a deal?

I think we chip away at the u.s. credibility, both when we see the craziness in washington, as well as the rating agencies are fighting over who can come up with this aspect of the short-term issues.

One thing so cool is you have worked at a number of these agencies as well.

I think to a lot of people it is what do they really do?

You go to lunch, come back, what do you do at a raising -- rating agency?

I am so glad you think it is cool.

I have never heard anybody say that.

If you look back, talk about the sovereign ratings.

They really came about years ago to give a framework for rating institutions abroad.

Today it is used to scold politicians.

They have sort of lost sight, particularly when it comes to the u.s.. you really have to use -- look at the u.s. differently.

Enormous demand for treasuries, even when you see the craziness going on in washington.

Long-term as politicians continue to use these points to argue political issues, it is going to chip away.

It is a $16 trillion economy.

All that we are talking about is political will to act.

Is that part of the ratings?

It is.

I think the s&p took it as a short-term measure.

Really it is long-term.

It really should be looked out over a longer amount of time.

I will give you a great example.

If s&p felt strongly, how is it the rating aaa mortgage-backed bonds?

500 u.s. families more credible than the u.s. government?

Makes no sense.

Unless you are going to use that as a measure and have an impact on how you rate everything, it loses the effectiveness.

A lot of questions over what criteria is being used.

Rand paul spoke on the state of the union.

He made interesting comments.

People have to realize you have to balance the budget.

People are confusing these, and they are not the same thing.

He also made the concern -- made a point that the concern is over the size of the u.s. debt.

This is always something you look at.

More problematic when you are not the reserve currency of the world.

You use different metrics.

I go back to august 2011 with the u.s. was downgraded by s&p. what we saw the next day was a flight to treasuries.

I think that is counter to what you would have expected had there been concern about the u.s. deficit or size of the debt.

The other factor is the rating companies are for-profit.

That is right.

They are coming off of beings act -- smacked around in the subprime crisis.

We have to leave it there.

The aaa credit of the united

This text has been automatically generated. It may not be 100% accurate.


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