Was Standard & Poor’s Playing Politics Today?

The Standard & Poor’s rating firm cut the long-term United States debt rating to negative from stable today. Inexplicably, stocks took a nosedive, though everyone has known about the longterm debt problem. So why now?

Some say that S&P are playing politics, according to Steven Blitz, a senior economist for ITG Investment Research:

"S.&P. and all the rating agencies are still under a lot of pressure to reform and this action could help them by helping the White House scare the Republicans to engage in responsible political negotiation to reach some reasonable deal on deficit reduction and raise the debt ceiling rather than have the talks take on the aura of a hostage negotiation."

This, of course, is the same rating firm, along with others, that failed miserably before the financial crisis:

"The Senate Permanent Subcommittee on Investigations released findings from a two-year study this week, saying "inaccurate triple-A credit ratings" from Standard & Poor's and Moody's Investors Service introduced risk into the financial system and "constituted a key cause of the financial crisis."