Town and Country Has Better Credit Rating Than America

Last week, investors took the stock market on a wild ride after Standard & Poor’s Aug. 5 downgrade of the U.S. credit rating. The country lost its top AAA score, and for the first time ever, was dropped to the second-best rating of AA+.

Investors reacted to a series of events through the week, starting with the credit downgrade, which sent the market plummeting by 634 points on Monday. It rebounded 429 points on Tuesday after the Federal Reserve announce it would leave interest rates low through 2013. Wednesday it crashed again by 519 points, then bounced back 423 points on Thursday following news that new applications for unemployment had dropped. It finished the week up 125 points on Friday after it was announced that the Deloitte Consumer Spending Index improved for the first time since January.

The state of Missouri holds a AAA rating by S&P, as does Town and Country. Officials from Town and Country are proud of their top rating and point out that only 70 municipalities in the United States carry the S&P AAA rating. Manchester has not been rated by Standard & Poor's, but has an AA2 rating from Moody's Investors Service. AA2 is the third-highest rating Moody’s awards, after AAA and AA1.

Some are worried that S&P may downgrade municipalities next, which would make the cost of issuing bonds more expensive for cities. Cities issue bonds when they need to finance large infrastructure projects, like road construction or building public structures. Finance director Dave Tuberty said that Manchester does not have any plans to issue new bonds in the foreseeable future.

“We’re not anticipating going out in the market anytime soon,” said Dave Tuberty. “It’s up in the air at this point how it’s going to play out. We’re certainly watching it closely,” he said when asked about the nation’s credit downgrade.

It should be noted that the change from AAA to AA+ means very little by definition. According to S&P’s own definition, “An obligor rated 'AAA' has EXTREMELY STRONG capacity to meet its financial commitments,” while AA is listed as having a “VERY STRONG capacity to meet its financial commitments.”

For comparison, Canada is rated AAA, while Mexico is rated A-. Overseas, Britain, Germany and France have an AAA rating, and Italy has an A+. Japan, Saudi Arabia and China have an AA- rating, a step below the United States. The very worse rating the S&P has handed to a nation is Greece’s CC.

S&P’s ratings go from the highest, AAA to AA (with a plus or minus) then to A+, A, A-. After that come the B ratings, starting at BBB and going down to B-. The ratings end at D, which is for default.

The S&P website explains the reason for downgrading the nation:

"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011."

Standard & Poor's also said that it is "pessimistic" about the ability of Congress and the administration to agree on a plan that could stabilize the government's debt any time soon.

There are two other major credit rating agencies, Moody's and Fitch. They have not downgraded the nation, and still give the United States a AAA score.

On the Horizon:

• Yellow-Tie International is holding “Coffee & Handshakes Business-Networking Before Hours” from 7:30-9 a.m. at Integrity Group Realtors in O'Fallon, MO. Free.
• Starting a Small Business: The First Steps is a class offered by the University of Missouri on Aug. 26 at the J.C.Penney Conference Center. Class fees are $50.
• Power Learning Workshop: Social Media Optimization is a class offered by CMS Solutions, a St. Louis-based company. Class fee is $199.