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FBN’s Charlie Gasparino on why lawmakers are not concerned about a potential U.S. credit rating downgrade if the fiscal cliff is reached.
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How worried is congress and the president about another ratings downgrade of the US credit if they fail to put together a budget deal that addresses the country's mounting debt.
Not very at least according to a private briefing Goldman Sachs have for its clients yesterday featuring former senators John Breaux and Trent Lott Charlie Gasparino has insights.
God I didn't hack into the coal.
I I've got I got a number.
And I called the number and it worked and fascinating way it was -- it was really good because we feel Breaux and Lott you know broad deficit and former democratic senator from Louisiana lots of former Republican from Mississippi.
-- pretty candidly -- to questions it was kind of like be the moderator let him through a series of points and you know they went through the you know various issues with the fiscal -- think they're gonna deal with -- -- some way at least a short term and short term solution then maybe the long term solution tax reform.
But then it got down to the notion -- nothing happens.
And do do do need to look -- really care about a ratings downgrade.
And both of point blank said right now congress and -- -- is operating like who cares and that.
That the -- she's make no difference in this whole debate now it was a political called if I would I would say this one.
Does make a difference in his -- as you know -- and not much not market reaction primarily because.
You know where the tallest midget in the room right everybody flooded treasuries -- the trust so with a completely outside of the article we are the tallest midget in the room we in which money -- put in Spain.
And it because it's a single downgrade and the other two have is a triple -- you know people look at the US has go with -- this is having generally looking about markets go to higher ratings -- -- -- bring good if you can go with the hiring.
Just wanna be different if Moody's downgrades right -- literati yes if Moody's downgrades it will no longer be split rating it'll be the official below AAA.
Now what happens in that respect note I I you know people sort of buy our debt because -- we have put in Spain and it is not a lot placement but.
There's all these contracts all these all the all this sort of debt debt is issued.
From by other companies could go op -- the reason why is because -- -- -- AAA it will no longer be priced off Tripoli this we'll have an impact on the markets I think.
And what's fascinating is that these -- this debate right now.
He's not think it is this into account so you as an investor should take this into account when you -- thinking about your future.
We think about what you're we if you go by corporate bond or whatever.
I'll remember they're priced -- the triple -- treasury.
At Moody's downgrades and there's a good chance they will -- is particularly if they kicked the can't on this.
You know if it basically if they don't do a real -- like show them that they're moving in the direction of doing a real deal.
Even if if -- stop gap has to show some directional moving forward in terms of dealing with debt.
Moody's could do is likely to downgrade and that's when this situation could kick him what you heard on the call where the people -- Goldman in agreement with the it wasn't like that it was a moderator and Lloyd Blankfein didn't like you know chime in use a moderator.
And and both -- a former senators you know given their two cents they were pretty much in agreement on everything they think there's going to be stopgap solution.
They think they're gonna -- great we're beating the country is gonna deal with dumb with tax reform and in the in the coming year.
And they think that.
And then of course they agreed on this one -- you have to -- separate I will say this I don't agree with that I know you don't but if you look back to a year ago August.
Is spark plug already blown it's no longer shocked if we get a downgrade and therefore I understand your split ratings idea but the fact that we've already seen -- Makes so much less shocking for invest -- -- shocking but I mean there's a there's a reality to it that when you're no longer triple -- credit.
I mean when you have two of the three senior and only triple -- you really no longer -- when when people most of them -- -- debt.
This is get this -- it could mean who fight night I don't wanna predict the future but I can tell you that financial products that are now priced off AAA and that's corporate bonds.
Municipal bonds often priced off of a spread -- triple -- if -- get up -- price war for stroll of the spread of double O whatever they're gonna downgraded to.
That's a difference and that has an impact on the market and you know those financial products have to be re price there's a degree a greater degree of uncertainty so.
While the first -- wasn't so -- because it's a split -- go with a higher.
I'm just saying nothing's gonna happen this could be dead as a suddenly you as an investor should pay attention to this one more than the other one.
Because it's no longer split we are now -- official you know can.
Below investment below AAA rated country and that's as a financial impact Charlie calling it copy -- the number.
Picked up the phone know that the conference he already forgot what number Seattle as many numbers back at Charlie Gasparino.
