Subprime Country

Saturday, August 6, 2011

Well, it’s official. Despite and perhaps because of the remarkable debt limit legislation our President and Congress have just completed, Standard & Poors has lowered our credit rating, our national FICO score, from AAA to AA+. We, the United States of America, are now a subprime country.

Apparently, S&P wasn’t so much worried that we wouldn’t increase the debt ceiling as that we’d do it without taking any significant, short-term steps to reverse our long-term tendency to borrow ourselves into financial oblivion. When a lender – and that is their perspective – is evaluating a borrower, whether personal, corporate or government, one of the most important components of that evaluation is recent behavior history. Poop happens, to be sure, but has the prospective borrower shown maturity, commitment and intelligence in how it has dealt with adversity and managed its resources? Does management – whether we’re talking about a household, corporate executives or the President and Congress – seem competent? To what degree can that entity be counted upon to protect and return, with interest, money that is loaned to it?

How depressing. Don’t blame S&P. Blame the President and Congress who have certainly done everything possible to discourage confidence in their leadership. These people, the President included, are clueless and wouldn’t recognize real solutions to our national financial and other problems if they tripped over them. And they have, tripped over them, that is.

The really good news is that we (our government) can now enjoy all the advantages subprime people do. We can now pay higher interest rates to borrow money on which we can’t afford to make the payments anyway, so who cares? Our military and other branches of government can now buy weapons, bullets and other stuff at places that advertise, “No credit, no problem!” Instead of driving shinny new limos, our President and Congressional leaders can drive themselves around in older, higher mileage used cars. This is great.

I see only one real problem. Do you remember how our government squandered hundreds of billions of dollars saving commercial and investment banks whose executives were making money hand over fist by recklessly lending to subprime customers, and how we gave them all that money on the condition that they promise to never, ever do that again? And to their credit, no pun intended, they’ve tightened up their underwriting and haven’t been lending any real money to anyone since then. They’re not going to help. Europe’s up the creek. Japan’s got it’s own problems to worry about. And borrowing more from China has too many strings attached.

So who’s going to bail us out now that we’re broke?



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