The credit downgrade for the U.S. costs $1billion extra a week in borrowing costs. This issue has already been addressed by many: credit rating agencies have too much power. And, everyone goes on to note how they kept Lehman Brothers on a triple-A rating days before the financial collapse, etc…
While they probably are viewed as evil, bond portfolio slayers (especially S&P), what if we can gain enough leverage on them to do the opposite? It will be hard to change their sway on the market because they have been there for so long. We could point out as many incompetence as we like about their procedure and ignorance, but we can’t overturn their influence over night.
Completely ignoring the moral issues, rating agencies may be a much needed boost down the road. As the market struggles ahead, it keeps on dipping back down because it doesn’t have enough momentum. If, at the next tipping point, before the next batch of reports on PIGS send sellers into panic, if all the rating agencies backed the EU for a change, what would happen?
Given the historical sway of the ratings agencies, while they can’t single-handedly prop the economy back up, I just thought it would be interesting if our politicians can enact this “stimulus” with good politics.