Mon, Aug 15, 2011 - Page 10 News List

US commission probes S&P credit downgrade process


The US Securities and Exchange Commission has launched a probe into the process by which Standard & Poor’s downgraded the US credit rating, the Wall Street Journal reported on Saturday.

US officials lashed out at S&P after it docked the country’s credit rating from “AAA” to “AA+,” accusing the agency of committing a US$2 trillion math error and of using a faulty baseline. S&P has stood by its analysis.

The Journal, citing unnamed sources, said the commission would investigate the mathematical model used by the agency and look into which S&P employees knew of the decision to downgrade before it was announced.

Rumors of a possible downgrade circulated on the market the Friday before last, hours ahead of the announcement, which came after markets had closed.

However, the Journal said there was no evidence that any employees leaked news of the downgrade or engaged in any suspicious trading ahead of it.

S&P said the decision to downgrade the US long-term credit rating came as a result of divided US lawmakers failing to agree on a deal to reduce the ballooning US debt by some US$4 trillion over 10 years.

The decision followed a bruising fight on Capitol Hill over raising the country’s congressionally set debt ceiling, which resulted in a limited agreement to cut some US$2 trillion over that period.

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