Seriously. All you people on left and right, suspend your disbelief for one minute. Seriously.What if Barack Obama was right and S&P just got it wrong.Here’s what I’m hearing and it gives credence to this theory.S&P, I’m told, began telling some of its clients about the downgrade on Friday morning. That’s why the market was so screwed up on Friday.By Friday afternoon, the Treasury Department told S&P it had made a $2 trillion math mistake.But S&P had already told its clients about the downgrade. So it couldn’t walk it back now without a major loss of confidence in its credibility. Could you imagine that conversation? “Hey . . . um . . . Joe. Yeah, Charlie here from S&P. So . . .um . . . we made a $2 trillion math mistake in our downgrade analysis. . . . What’s that? You just lost $500 million in the market because of it? Oh . . . um . . . sorry Joe. Better luck next time.”So it had to come up with a different reason.It’s reason? Acrimony in Washington — in other words, nothing to do with the U.S.A.’s ability to pay its debts or financial issues, just typical Washington politics. And it couched its statement in such a way that the tea party movement could say, “see, see, we told you Washington needed more cuts,” and the left could say, “see, see, we told you we needed tax increases.”Acrimony in Washington is nothing new. Despite a lot of rhetoric about compromise this past week, it is a feature, not a bug, of the American system of government. And major debt and growing deficits are nothing new. And they are bipartisan, pre-existing, long term, and long existing problems.In other words, nothing new.
But S&P did the downgrade. And by any objective measure, it would need to downgrade France for the very same reasons it gave, but it has not done so yet — though that may change.So maybe the White House is right and S&P figured it needed to save face, do the downgrade, and come up with a loosey-goosey reason that both sides could seize on to fight it out while ignoring that S&P just made a major mistake and the country took it on the chin because of that mistake.Now, to put my partisan hat back on — if the White House is right and this is what happened, why the hell is David Axelrod out blaming the Tea Party Movement, a movement that at best has the support of a few dozen members of the United States House of Representatives and has only seen those members in office for six months?That’s as irresponsible as S&P, and it also does not compute if S&P is the one that screwed up.
* By the way, to lend further credence to the idea that maybe the White House economic team is right and S&P screwed up, where did investor cash flee to during the market collapse of Friday and now, it seems, again today? Why U.S. Treasuries of course.