S&P's downgrade of U.S. credit rating means a downgrade of U.S. based business credit ratings? Insane.

[Gutenberg]

I got this notice from my insurance company. I don't get S&P's rationale, which is, essentially, that since it downgraded the nation's credit rating, it also downgrades the credit ratings of businesses that are based in the country. Last I checked, businesses in this country don't have to check with Congress before paying the bills.

https://www.usaa.com/inet/ent_blogs/Blog...n=blogpost&blogkey=newsroom&postkey=sandp_downgrade&offername=pubHomeMbr_Bnr_Bnr_1_080811_CorpComm_SandPdwngrde

[RgrF]

The next sound you will hear is the transferring of corporate headquarters from Delaware (a tax dodge state) to the Caymen Islands (a tax dodge country).

[cbelt3]

Gute-
Logically restricted to large Insurers. USAA is tied to the Federal government. It *is* actually logical... when your primary customer(s) get downgraded, and your business depends on them, it's assumed that the fail might 'trickle down'.

It makes sense in an evil way.

[Gutenberg]

The United States of America is not the primary customer of United Services Automobile Association. You're wrong.

[cbelt3]

You're right. I'm wrong. Damn... I thought it was one of those agencies that mostly sells to Federal Employees.

OK, a bit more research and the reason is that the TEN insurance companies downgraded have a large proportion of their holdings in US Debt.
http://www.insurancejournal.com/news/nat...209893.htm

"The 10 affected insurance groups operate in the U.S. and generally have significant holdings of U.S. Treasury and agency securities. For the insurers with the most exposure, these investments constituted as much as 200% of total adjusted capital at year-end 2010, according to S&P."

So yeah, still kind of logical.

Of course by extension banks, etc..... The dominos are still falling and clicking together.

[Gutenberg]

But, S&P itself said that even in the event of a US default, the losses, if any, for all of the insurers would be "modest" and "manageable."

""However, in the unexpected event of a U.S. default, we would expect these insurers' losses, if any, to be modest and manageable relative to capital," S&P said in its July 15 report."

From this blog:

http://blogs.courant.com/connecticut_ins...ght-f.html

So, I repeat, insane.

[cbelt3]

I sort of wonder if S&P is hiding their $2Trillion math error by taking out the shotgun and shooting at a bunch of other companies. When you move from straight mathematical formulations to judgment calls.... bad things happen.

[$tevie]

How long before the conspiracy theories begin? Like, S&P is being paid off by the Koch brothers. I am not so sure I am totally crazy here.

[OWC Jamie]

[hal]

$tevie wrote:
How long before the conspiracy theories begin? Like, S&P is being paid off by the Koch brothers. I am not so sure I am totally crazy here.

yer totally crazy here...