How the United States Handles Downgrades to Its Sovereign Debt Rating

What happens when a credit rating agency downgrades the United States federal government’s sovereign debt rating? The United States sues your ass:

Standard & Poor’s says it is to be sued by the US government over the credit ratings agency’s assessment of mortgage bonds before the financial crisis.

The lawsuit will not only be brought on by the United States government but will also take place in a United States court, making for an interesting conflict of interest that will go almost entirely ignored by most people. On top of that, even if the case ends up in Standard and Poor’s favor, the damage has already been done:

Shares in S&P’s owner, the US publishing and media group McGraw Hill, fell 14% on Wall Street on Monday following the announcement…

On top of that people seem to believe that Standard and Poor’s isn’t the only target of the Department of Justice’s (DoJ) wrath:

while those in fellow ratings agency Moody’s fell 10% – indicating the market expects that they may be next in the justice department’s sights.

While Moody’s didn’t downgrade the United States debt rating they did change their outlook to “negative,” which makes them another likely target of the DoJ’s wrath. Today’s lesson is that you can’t criticize the United States government without inciting its wrath.