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Securities and Exchange Commission to check S&P’s math on downgrade

By Agence France-Presse
Saturday, August 13, 2011 21:43 EDT
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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.

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 $2 trillion math error and of using a faulty baseline. S&P has stood by its analysis.

The Journal, citing unnamed sources, said the SEC 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 $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 $2 trillion over that period.

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
 
 
 
 
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