Bolling Worries About Potential Economic Consequences Of S&P's “Downgrade”

Bolling: "[S&P] Also Put Us On Negative Credit Watch ... This Is Really, Really Scary." On the August 8 edition of Fox News' Fox & Friends, guest host and Fox Business host Eric Bolling discussed S&P's “downgrade” of the U.S. credit rating. He said that the move was especially troubling because S&P “also put us on negative credit watch,” meaning S&P is considering downgrading the U.S. credit rating again. From the broadcast:

STEVE DOOCY (co-host): Remember, Moody's and Fitch, the other credit rated [sic] agencies -- they still have given us a triple-A. They reaffirmed that on the second day of August.

BOLLING: They are still giving us triple A, and they haven't downgraded. But the issue is, and very importantly, when S&P downgraded us on Friday, they also put us on negative credit watch. Meaning, their next move is likely to be down again, not back up to a triple A.

DOOCY: Now, what did you call that?

BOLLING: That's--

DOOCY: What kind of credit watch?

BOLLING: The watch list, their credit report.

DOOCY: Double negative?

BOLLING: Oh, you mean what's the next level? Who knows? It could be a single A, which is, you know, bordering on junk bond status. This is really, really scary, because if S&P were to go to another negative notch down in credit, Fitch and Moody's would have to, likely have to, follow suit, at least one down. [Fox News, Fox & Friends, 8/8/11]

Bolling: “Any Way You Slice It, This Downgrade Can't Be Good For America.” Later on the August 8 broadcast, Bolling interviewed Tom Belesis, CEO of John Thomas Financial, and said at one point, “Any way you slice it, this downgrade can't be good for America.” From the broadcast:

BOLLING: Asian markets already feeling the impact of the United States' first-ever credit rating downgrade. Nose-diving overnight, adding to fears that a global selloff will extend here later on this morning. Joining us now with analysis is Tom Belesis, who is founder and CEO of John Thomas Financial. Thanks for joining us and getting up early.

BELESIS: Thank you.

BOLLING: You watched it. You watched Asia take a 2 percent selloff. Then you watched Europe, kind of buoyant. What does that mean for us? Does that mean we're coming back in America?

BELESIS: You know, I think you're going to have an initial, you know, down day in the market. But overall, I think the market is going to brush it off. Because, let's look at the credibility here with the S&P. I mean, this is the same rating agency that rated the toxic subprime junk triple A, on top of their estimated $2 trillion error in their calculation for the 10-year projection on the deficit, which they just brushed aside. So I don't think it warrants too much concern for investors. I believe they have to focus on earnings. And corporate America is doing very well.

BOLLING: Tom, I'm watching the futures right now trade down 215 points. So we had 300 points in the middle of the night. Any way you slice it, this downgrade can't be good for America. And the American economy is struggling to get back on its feet. [Fox News, Fox & Friends, 8/8/11]

Bolling: “There Is Deep Economic Anxiety [This Morning]. I'll Say That ... As At Least A Minimum.” Later during the broadcast, Bolling again discussed the downgrade with Doocy and co-host Gretchen Carlson:

CARLSON: Good morning, everyone. We have Eric Bolling sitting in for Brian Kilmeade today. Eric knows something about the markets. So you're the perfect person to be sitting here.

BOLLING: And boy, are they wild right now. They are all over the place right now. We begin with a “Fox News Alert,” and look what's happening across the globe as the world reacts to America's credit being downgraded. From Frankfurt and London to Tokyo and Wall Street, there is deep economic anxiety. I'll say that is -- as at least a minimum, Steven.

DOOCY: Absolutely. Nikkei index finished down something like 2 percent. Right now, I was looking at the European stock market and, you know, it's pretty much down one, two, almost three percent. The CAC is down two percent. And the Dow right now is down, what, 200 and --

BOLLING: Yeah, 238 points right now as we speak right now.

DOOCY: Holy cow.

BOLLING: So it's really, really moving lower.

DOOCY: All right, that is not good for us.

[...]

BOLLING: All right. So let's say the S&P downgraded America on Friday night. So everyone's waiting to see what was going to happen in Asia. Asian markets opened last night, and Steve pointed out there -- there was about a 2 percent drop. Through the night, somewhere at about 1:00 in the morning Eastern Standard Time, the European Central Bank came in and propped up Spain and Italy because there was fear that Spain and Italy were the next Greece --

DOOCY: Right.

BOLLING: -- so they said come on, we're going to hold this up, especially [with] what's going on over there in the U.S. It held the European markets -- the United States market, the Dow was down 300 points at the time, Gretchen. It is now down --

CARLSON: In the futures.

BOLLING: In the futures, which is a very good indicator of what's going on. It jumped back from 300 lower to 100 lower and now it's back to 235 lower --

CARLSON: Now let me ask you this --

BOLLING: That's not a good sign. [Fox News, Fox & Friends, 8/8/11]

But Bolling Previously Cheered For Default ...

Bolling: “Let Them Default.” On the April 13 edition of Fox News' Fox & Friends, Bolling responded to Fox Business host Stuart Varney's assertion that not raising the debt ceiling would be “Armageddon” by saying, “I say let them default.” From the broadcast:

VARNEY: As you approach this deadline, if you're even talking about default, as even a possibility, a remote possibility, you really spook the world's money people. You really spook them.

BOLLING: I say let them default.

VARNEY: Really?

BOLLING: Let them go. What's going to happen?

VARNEY: You're a brave guy.

BOLLING: What's going to happen?

VARNEY: Armageddon's going to happen.

BOLLING: How is it going to be Armageddon? Let's talk about that for a second.

VARNEY: OK. If we fail to allow ourselves to borrow any more money --

BOLLING: Right, I know the process. And then everyone raises their hands and says, “Oh my God, the U.S. is going to default.” Well -- where are they going to go? If the U.S. defaults, every other country in the world is going to default, too.

VARNEY: We're paying out -

BRIAN KILMEADE (co-host): That sounds like Armageddon.

VARNEY: We're paying out 300 -- yeah, exactly.

BOLLING: My point is they're going to get the -- the theory that let's let it go and see what happens -- I like it. I like it. Because we could default and then get the spending under control. Get everything we want in default. It's -- for my -- for my dollar, let them go. Let them get to the point where -

KILMEADE: We can't get a credit card for seven years after that. As a country.

BOLLING: Who the U.S.? We'll get it the next day. China will be on our doorsteps saying, when can we give you money again?

VARNEY: You think?

BOLLING: Yeah, I do.

VARNEY: OK. If you don't allow us to borrow any more money, you've got $350 billion every month going out and only $200 billion coming in.

BOLLING: That's got to stop. That will force it to stop. That will guarantee --

VARNEY: So you've got an immediate $150 billion cut every month.

BOLLING: That will guarantee in order for it to come out of default, you have to stop spending. [Fox News, Fox & Friends, 4/13/11, via Media Matters]

Bolling: Raising The Debt Limit “Is The Worst Idea I've Ever Heard.” On the May 5 edition of Fox & Friends, Bolling again reiterated his claim that the U.S. government should force itself to exceed the debt limit, because it “would put the onus on Congress to stop spending.” From the broadcast:

KILMEADE: But in the big picture, I hear they are making some progress along the way to raise [the debt ceiling]. We also see Timothy Geithner explaining he's got flexibility now they never thought he had.

BOLLING: Sixteen trillion dollars. That's where they want to get to. Right now it's 14.3 trillion.

DOOCY: They want two trillion dollars more.

BOLLING: They want two trillion dollars more, Steve, which means -- by the way, they say that'll take us through the presidential election. This is the worst idea I've ever heard. Now my colleague Stuart Vareny and I had an argument right here on this couch a couple weeks ago. I think they should let us exceed the debt limit. What does that mean? Would we shut down?

DOOCY: How far?

BOLLING: That's the question, Steve. Get there, exceed the limit. That would put the onus on Congress to stop spending. They'd have to stop. If you keep giving a bigger and bigger credit card, they're gonna spend it. [Fox News, Fox & Friends, 5/5/11, via Media Matters]

Bolling: “This [August 2] Deadline Could Come And Go ... We Can Pay The Debt ... That Downgrade And Default Thing ... Won't Matter.” On the July 28 broadcast of Fox & Friends, Bolling dismissed the consequences of a possible failure to to raise the debt limit by August 2, claiming “we [could] pay the debt” even after passing the August 2 deadline without a deal. Bolling also claimed that “Moody's and S&P ... downgrade based on whether or not the country, the government is paying the debt.” From the broadcast:

BOLLING: We should buy and hold and see what happens. Gretchen, we were on this couch a months ago saying, listen, don't worry about the initial default date because it wouldn't matter. I said it wouldn't matter. It was, oh, no, no, that's going to be horrible, all the blogs picked it up and said Bolling's an idiot. The economy is going to go, you know, into the tank if we let it go. It went. This deadline could come and go. We take in three -- no, I'm sorry. We put out $300 billion. We take in $175 billion per month. That means we could pay Medicare, we could pay Medicaid. We could pay Social Security.

BRIAN KILMEADE (co-host): But someone won't get paid, Eric.

BOLLING: We could pay the military --

KILMEADE: But is it true that someone won't get paid?

BOLLING: Wait, wait. Most importantly, we can pay the debt. So that downgrade and default thing that they keep throwing out there and scaring the bejesus out of people -- it won't matter. Because Moody's and S&P, they downgrade based on whether or not the country, the government is paying the debt. They don't care if they're paying the postal service or not. They care about the debt. [Fox News, Fox & Friends, 7/28/11]

... Which Experts Warned Could Have Lowered U.S. Credit Rating

NYT: “Moody's Warns Of Downgrade For U.S. Credit” Without Debt Limit Increase. A June 2 article in The New York Times stated:

Moody's Investors Service warned Thursday that it might downgrade the United States government's sterling credit rating if Congress did not increase the nation's debt limit “in coming weeks,” putting a spur to the sputtering talks between party leaders and the White House on a plan to restore fiscal stability.

The warning, from one of the agencies whose assessments of creditworthiness help determine interest rates, amounted to a stern reminder from Wall Street to Washington that global financial markets are watching the budget battle closely and that a standoff or brinkmanship could have economic consequences.

[...]

Its warning was two-pronged. First, Moody's said, if Congress does not increase the Treasury's borrowing authority in coming weeks, the nation's credit rating may be lowered “due to the very small but rising risk of a short-lived default.” That is likely to translate into higher interest rates at a time when the recovery shows signs of slowing again.

And second, Moody's said, with an implicit slap at both parties, that whether the United States keeps its triple-A rating “will depend on the outcome of negotiations on deficit reduction.” [The New York Times, 6/2/11]

Forbes: “A Default, Let Alone A Credit Downgrade If A Default Of Any Length Were To Happen, Would Have Catastrophic Economic Consequences.” A June 13 Forbes article suggested that a downgrade would be likely in the event of a U.S. default and warned that it would cause “catastrophic economic consequences”:

If Congress fails to increase the debt limit, the government would have to stop, limit, or delay payments on a broad range of legal obligations, including Social Security and Medicare benefits, military salaries, and interest on the national debt, which is paid to big, market maker banks like J.P. Morgan Chase, Citibank, and others, not to mention the government of China, which is the largest holder of US government bonds overseas.

Defaulting on those obligations, including coupon payments to bond holders, would cause severe hardship for the US economy. It would erode the historic legacy of the US as the safe harbor within the global financial system.

[...]

A default, let alone a credit downgrade if a default of any length were to happen, would have catastrophic economic consequences, potentially including the loss of millions of American jobs. It could lead to the loss of jobs, primarily, because as the US credit rating goes from AAA to AA -- which would be the most likely downgrade -- credit default swaps, or insurance on bonds, would increase for corporate bond issuers. That means it would cost companies more money to borrow. Many companies, seeing their bond prices fall, would likely be forced to offer the market higher interest rates to bring them back to the table. Higher borrowing costs is not good for growth. The job market, already hit or miss, would likely be put on pause. [Forbes, 6/13/11]

And Experts Agreed A Default Would Have Been An Economic Disaster

Council On Foreign Relations: “Most Economists ... Agree That The Impact Of A Government Default Would Be Severe.” From a report by the Council on Foreign Relations titled “U.S. Debt Ceiling: Costs and Consequences”:

Most economists, including those in the White House and from former administrations, agree that the impact of a government default would be severe. Federal Reserve Chairman Ben Bernanke has labeled a U.S. default a “recovery-ending event” (WSJ) that would likely spark another financial crisis. But short of default, officials warn that legislative delays in raising the debt ceiling could also inflict significant harm on the U.S. economy.

Geithner has argued that congressional gridlock will sow significant uncertainty in the bond markets and place upward pressure on interest rates. He warns that the increase would not only hike future borrowing costs of the federal government, but would also raise capital costs for struggling U.S. businesses and cash-strapped homebuyers. In addition, rising interest rates would divert future taxpayer money away from much-needed capital investments such as infrastructure, education, and health care. Estimates suggest that even an increase of twenty-five basis points on Treasury yields could cost taxpayers as much as $500 million more per month. [Council on Foreign Relations, 4/22/11, updated 8/2/11]

Former Treasury Official: Default “Would Make The Lehman Brothers Bankruptcy Look Like A Walk In The Park.” The Hill reported on former Treasury Department official Jim Millstein's comments to CNBC:

A former Treasury Department official who played a key role in the government's efforts to recover from the financial crisis said Tuesday it would be “nuts” to even consider not raising the debt ceiling.

Jim Millstein, who oversaw the Treasury's effort to restructure American International Group before leaving the public sector in February, argued on CNBC that the debt ceiling has to be raised to avoid “extraordinary” adverse consequences.

If lawmakers balk on boosting the ceiling and the government defaults, the former Obama Treasury official, said it “would make the Lehman Brothers bankruptcy look like a walk in the park on a sunny day.”

When Lehman declared bankruptcy during the heights of the 2008 financial crisis, it marked the largest bankruptcy in US history, and it played a major role in driving down financial markets. The Dow Jones Industrial Average dropped 500 points the day the firm filed for bankruptcy -- the largest at the time since the terrorist attacks of Sept. 11, 2001.

“There are a lot of people talking about this debt ceiling of being no consequence and we can blow right by it without any consequences, and I just think it's nuts,” Millstein said. [The Hill, 4/12/11]

For more on experts' warnings about the risk default posed to the U.S. economy, SEE HERE.