U.S. gets C credit rating, lower than Mexico

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Weiss judgment ‘attention-grabbing,’ says president of Egan-Jones

By Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) — The U.S. got a sovereign credit rating of C on Thursday, in line with ratings for such smaller economies as Mexico, Estonia and Colombia. 

Weiss Ratings, based in Jupiter, Fla., has rated the creditworthiness of financial institutions for several years, but the firm launched sovereign- debt ratings of 47 countries on Thursday. The U.S. rating of C (Fair) ranks it 33rd, Weiss noted in a statement. 

A C from Weiss is roughly equivalent to a BBB rating from the big rating agencies like Moody’s Investors Service, Standard & Poor’s and Fitch. That’s about two notches above non-investment grade, or junk, status.

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The rating comes just over a week after S&P revised the outlook on its AAA rating for U.S. government debt, cutting it to negative from stable. Read the story here. 

 

”The AAA/Aaa assigned to U.S. sovereign debt by Standard & Poor’s, Moody’s and Fitch is unfair to investors and savers, who are under-compensated for the risks they are taking,” Weiss Ratings President Martin Weiss said in a statement. “An honest rating is also urgently needed to help support the political compromises and collective sacrifices the U.S. must make in order to restore its finances.”

China, Thailand get top ratings

The firm gave top A ratings to China and Thailand and assigned A- ratings to Switzerland, South Korea, Malaysia and Saudi Arabia. 

By contrast, Greece got a rating of E (very weak), while Portugal, Pakistan, Spain and Venezuela received D+ ratings from Weiss. 

The U.S. shares C ratings from Weiss with such large countries as Japan, Brazil and Canada as well as with smaller economies like Colombia, Estonia and Mexico. 

The amount of U.S. sovereign debt outstanding has soared in recent years as the government bailed out financial institutions and used huge fiscal stimulus programs to get the economy out of the worst slump since the Great Depression. Read more about the second debt storm hitting nations.

‘Attention-grabbing’

Despite high government debt, the U.S. still has attributes that make it more creditworthy, according to Sean Egan, president of Egan-Jones Ratings, a rating agency that’s paid by investors rather than issuers. 

“The U.S. is the largest economy in the world, home to most industry-leading firms and maintains the reserve currency of the world,” Egan said. “That provides significant support beyond credit metrics like debt to GDP.” 

The Weiss rating is “attention grabbing,” Egan added. “But unless they’re seeing very different things from other people it’s hard to support a C rating.” 

In its Thursday report, Weiss gave a C- rating to Argentina, which defaulted on some of its external debt in 2002. 

“The U.S. and Argentina don’t usually travel in the same sphere,” Egan noted.

‘Enough time’

Egan-Jones has a AAA rating on U.S. government debt. But the firm put that on negative watch in early March. That means there’s a “better-than-even chance” of a downgrade within the next six months, according to Egan. 

“This problem is being given the highest-level attention currently in Washington,” Egan said. “Typically one shouldn’t worry as much about problems that have a spotlight on them — especially when there’s still enough time to react.