received numerous subpoenas and other government inquiries concerning the rating activity of standard and poor's. s&p, one of the three major bond raters, has come under fire since it downgraded u.s. credit on august 5. but the investigation by the justice department and s.e.c. apparently began months ago. the "new york times" which first reported the story says investigators want to determine if during the housing boom s&p gave triple a ratings to mortgage backed securities which some of its own analysts warned were more risky. jacob frankel once investigated financial fraud for the s.e.c. >> did the ratings agencies have a basis for issuing the ratings? or did they somehow manipulate or inflate the reasons and was that their motivation for doing so? >> reporter: during the free wheeling days before the bubble burst in 2008, banks, wall street and credit ratings agencies all made huge profits on mortgage securities. home loans were easy to get. and high s&p ratings made those loans attractive to investors. critics argue since investment houses pay the s&p to rate the assets, there was a built in i

thank you very much tom thank you for joining us standard and poor's s. and p. in their eight page report justifying this downgrade wrote and i quote we have changed our assumption on this there speaking of the probability that the bush tax cuts will be extended because the majority of republicans in congress continue to resist any measure that would raise revenues a position we believe congress reinforced by passing the act why was that indictment of the republicans completely ignored by the mainstream media and most of the economists who are on t.v. commenting about. well it's become a habit in our country to fold the tent in the face of what the big corporations and the wealthiest amongst us one they've enjoyed by far the largest tax cuts in american history over the last thirty years and especially since two thousand they don't want anyone to mess with their wonderfully reduced taxes so they've made it impossible for most politicians who depend on them for money to say anything about raising taxes so the republicans push it and the democrats cave in looking

there are three of these ratings agency, moody's, fitch and standard and poor. it's shat decided. how do they make that, five analysts in a room behind closed doors for at least a month, 6 weeks we're told, off and on meeting, going through the numbers. they look at things like how much wealth is in our country versus debt. are we on budget, of course that's been a big issue in recent weeks. they look at growth rates, and, this was the big one, they lincoln at politics. when s and p looked at the politics and the gridlock it wasn't just an issue with how much debt we're carrying, but it's the fact that we've got so much gridlock, washington's unable to come up with an effective plan to deal with it that's big enough to deal with the problem, and that's why they decided on the downgrade. what does it mean to you? when our credit is downgraded it's harder for our country to get good interest rates, to borrow money to pay off our debts. it could be harder for you to get good interest rates as well. if you buy a car or home or sending your kids to college. one thing you wa

no small measure by the willful, want, and reckless conduct of the dunces, and yes, perhaps criminals at standard & poor's. s&p and other rating agencies gave aaa ratings to mortgage-backed securities that turned out to be the toxic waste of wall street, junk worth virtually nothing. s&p gave that junk the same value as the safest investment in the world, united states treasuries. s&p gave lehman brothers an a-rating, right up to the month that lehman brothers went bankrupt. s&p was as wrong about lehman brothers as it is wrong about the united states of america. congressional investigators looking into the causes of the financial collapse found this instant message exchange between s&p employees. "that deal is ridiculous. i know, the model doesn't capture half the risk. we shouldn't be rating it. we rate every deal. it could be structured by cows and we would rate it." one s&p senior manager put this in an e-mail to another senior manager. "lord help our -- scam. this has to be the stupidest place i have worked at." s&p is the stupidest place everyone at s&p has ever worked at, and these two, john chambers

be stabilizing somewhat after a roller coaster week following the usz credit downgrade by standard and poors. the s&p 500 and nasdaq both saw modest gains. a much calmer end to a five-day period that included two of the top ten single day market drops in history. both followed by jumps of more than 400 points. cnbc's mandy drury joined me earlier with a look at this volatility. >> we're seeing a market that is really struggling to find direction. there are so many unanswered questions out there. questions like what did the downgrade mean for the united states? what is the fed doing to try to stimlit the economy? is the economy backsliding into a recession. what is europe doing about debt problems? while ufr unanswered questions, it's a lot ov uncertainty. uncertainty seems to create fear. >> cnbc's mandy drury dl. >>> in florida, casey anthony is ordered to return to the state to serve one year probation. she was acquitted of killing her daughter. the probation is for a conviction in a separate case. kerry sanders is in orlando, florida, with the very latest on this. good morning, kerry. i bet this

mortgage-backed security. >> the same standard and poors is really what caused the recession to begin with. >> the white house and treasury department are blasting the s&p analysis as fundamentally flawed, and that sentiment extends to main street. >> all of the people of that been watching the market have anticipated this to begin with. it's not going to mean anything to you or me. >> the volatility on wall street, though, is getting harder to predict. the past two weeks have been brutal, erasing more than $1 trillion in wealth. >> while i think the markets might have a short term reaction to the news of a downgrade, over the long-term i think the reaction would be very limited. >> corina rusk, abc7 news. >> england, france and has a double-a. it is better than russia's. >> and a phillies fan remains in critical condition following an accident on thursday night's game. >> he was struck in a crosswalk by a hit-and-run driver who was later arrested. baseball fans are sending their good wishes to the little boy. >> baseball fans stood as the announcer asked for a moment of silence and a quick recovery for 9-year-old ryan white. >> joanne from philadelph

mortgage-backed security. >> the same standard and poors is really what caused the recession to begin with. >> the white house and treasury department are blasting the s&p analysis as fundamentally flawed, and that sentiment extends to main street. >> all of the people of that been watching the market have anticipated this to begin with. it's not going to mean anything to you or me. >> the volatility on wall street, though, is getting harder to predict. the past two weeks have been brutal, erasing more than $1 trillion in wealth. >> while i think the markets might have a short term reaction to the news of a downgrade, over the long-term i think the reaction would be very limited. >> corina rusk, abc7 news. >> germany, france and i think land all have triple-a credit ratings. the u.s. rating is slightly better than that of china's double-a minus and russia's triple b. >> and a phillies fan remains in critical condition following an accident on thursday night's game. ryan white was struck in the crosswalk by a driver who was later arrested. baseball fans are sending their good wishes to the little boy. >> baseball fans stood as the announcer asked for a

. >> the most negative credit rating agency standard and poor's and s&p has yet to way. in they sort of boxed themselves in here. they say they want a credit downgrade if we don't cut more than $4 trillion. we have not agreed to do that still waiting to hear from s&p. moody's and fitch, however, keeping us at a a.a.a. credit rating with negative implication. still waiting for the most important rate. don't have it yet. we'll have to wait and see what the market makes of it. >> shepard: we will watch it for you doing the willis report. one hour special on jobs coming up the day after tomorrow. president obama says another standoff in washington is putting thousands of americans out of work, even tens of thousands and costing all of us millions and millions of dollars a day. you see, congress went off on summer vacation without ending the partial shutdown of the f.a.a. the feds say air traffic controllers and airplane inspectors are still working and they incision it is still safe to fly but more than 70,000 agency and construction workers are off the job. including the on

the dow jones is up more than 500 points and in fact, 550 and standard & poor's, s s&p up 64 points and. and now forthe first time the number of people applying for unemployment benefits has dropped, and maybe a sign of slow improvements in the job market. >>> and fewer u.s. homes were foreclosed in july and the foreclosure listing firm says that foreclosure listings fell from a month ago and auctions of homes seized by banks have also fell, and they say it is not a improving market, but processing delays. that is cnbc, business worldwide. back to you, jonathan. >> thank you. we are told that a house divided cannot stand, and fdr said that fear is our only enemy and jimmy carter warned of a crisis, and bill clinton felt our pain, and now president obama has the daunting challenge to say that the best days are not behind us, and we are once again can become the great nation. and it is the topic of a group by steven beschloss, "adrift." how did america find itself adrift and what is your prescription to correct that? >> well, there's an important sort of to look at the country, what has h

and the whole world is watching to see what happens next. brian mooar, nbc news, washington. >> treasury secretary timothy geithner was quick to take aim at standard & poor's. >> i think s&p has shown really terrible judgment and handled it so pooring and shown a stunning lack of knowledge about fiscal budget math and drew the wrong conclusion about this agreement. >> he has told president obama he is staying put. geithner is now the last remaining member of the original economic team. >>> across the nation people are mourning the 30 american service members killed in an attack this weekend in afghanistan. nbc's francis coe has more. >> reporter: the close-knit community prayed for the 30 service members killed over the weekend. >> i know the boys were doing what they love and they live for that. but to lose them is tough. >> reporter: navy s.e.a.l. aaron vaughn was based in virginia beach, 1 of 22 killed in the attack. he leaves behind a wife and two young children. >> it just felt like what he was doing was his duty and we were very proud of him. >> reporter: eight other u.s. service members died in the crash. among them 30-year-old patrick ham pittsburgher who was a

and that's where the s. and p. standard and poor's is trying to who they should be looking. to the future of the way they are being in the mainstream media. the tables of turning on standard and poor's there's not a being widely slammed for is this mission but also faces a legal inquiry found alice called vantages says is necessary because the downgrade may have been wrong for the lead straight is. there is clearly an element of legitimacy to investigating insider trading there was an awful lot of rumor mongering that was going on early the downgrade in this case the rumor turned out to be correct and there was a huge swing in the market on friday prior to the downgrade be issued so clearly some people knew in advance and the question is who are those people and how did they get that information because it is clearly improper under u.s. law to trade on material nonpublic information if you have it so to that extent the inquiries would you. now whether the white house agrees with this new credit score or not as one number the company avoided the fourteen trillion dollars in d

this market roller coaster was tied to standard & poors, s&p, and the downgrading of u.s. credit by the credit rating agency. s&p stripped the u.s. of its perforating, triple-a, giving it a lower grades of what s&p calls a double a+. this s&p downgrade to a double a+ was the u.s.'s first downgrade in its triple-a history. s&p's chairman john chambers says it may take more than a decade before the u.s. gets its triple-a status back. >> we've had five governments that lost their triple-a that got it back. the amount of time it took for those fivene years to 18 years. >> president obama's response. >> no matter what some agency may say, we've always been and always will be a triple-a country. >> the president initiated the blame game in his address monday morning. he blamed the s&p downgrade, then blamed the world, blamed the global economic slowdown, blamed the european dead crisis, blamed the japanese earthquake, blamed the arab spring, blamed washington, and then blamed washington's debated over the debt ceiling. but the markets were not swayed. before the president spoke

and that's where the s. and p. standard and poor's is trying to who they should be looking thank you to find the way there be in the mainstream media but now the tables are turning on standard and poor's it's not only being widely slammed first assertion but now also faces a legal inquiry financial analyst call it then it just says it's necessary because the downgrade may have been wrongfully leaked to traders there's clearly an element of legitimacy to investigating insider trading there was an awful lot of rumor mongering that was going on or the downgrade in this case the rumor turned out to be correct and there was a huge swing in the market on friday prior to the downgrade be your truth so clearly some people knew in advance and the question is who are those people and how did they get that information because it is clearly improper under u.s. law to trade on material nonpublic information if you have it so to that extent the inquiries would get a. while whether the white house agrees with its new credit score or not there is one

and that's where the s. and p. standard and poor's is trying to who they should be you look at it and you can read you look at the way they're being in the mainstream media. europe stock markets are also suffering losses they've seen london closing down over three percent this is despite european central bank decision to buy up spanish and italian government bonds oxys daniel bushell brings all the details from brussels greece is in big trouble it's fall into a fourteen year low because if the euro falls as increasing numbers here believe it could do greece will be first in the firing line if. to be an investor any more than an investor faces must be read like the markets there and everywhere and what's being dubbed black monday spain's become the latest state to pledge that it will change that it will reform it will get its house in order is that it will slash billions more of public spending but that doesn't help the mood in the european central bank either it will boil up spanish and italian that something that the hormones to the

standard and poor's man. the investigation began before s&p lowered the u.s. rating submit. quick break as the kron 4 morning news continues in a and we will have more on our continuing story from san raphael today is the second day a man is holed up in a hotel room highway 580 has been opened. we're waiting for a big sell-off european stock markets and asia are down dow futures are down 234 points and real will see a big drop here at the opening bell. developing story out what is san raphael at 580 is still open it created a huge traffic nightmare last night it was a standoff they were concerned about driver safety with the gunman fired towards the highway they shut the high way down as a cut precaution the police have now replaced iron sheet in front of the gunman's windowed me he is suspected of ash that being a clerk on sunday >> there seems to be some activity in the parking lot you can see the officers behind me talking they're using this letter so people can go up not to the rooftop and monitor the situation the recent 580 is open this morning this is video i shot abou

. >> according to mortgage experts, the down grading by standard and poor's was a logical next step after s and p down graded u.s. stats last friday. >> there is a serious problem. >> john holmgren is the former president of the california mortgage bankers association. currently open advisor. >> this is going affect the cost of credit and the long run. koit affect our economy in the long run, people have less confidence in the u.s. economy. that is implications for home prices among other thing autos fannie mae and freddie mac own, or guarantee about half of the u.s. mortgages and account for nearly all of the loans. their down grading expected to push interest rates higher, but so far it's had just the opposite affects. john lawson is the senior vice president for credit and risk. with san ramone's mortgage. >> for 10 year, 30 year fix rate, adjustable rates are actually going downward by as much as five to seven basis points today this, is having a positive affect on people who want to refinance or purchase a first home. >> that may be a short term benefit to some, larger impacts may be i

standard & poor's. but now his administration has downgrade by standard & poor's. but now his administration has to convince the world that s&p got it wrong, and the united states is still a sound investment. states is still a sound investment. s&p stripped our n rating, dropping us into an investment league with new rating, dropping us into an investment league with new zealand and belgium. >> it's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices now and in the future. a consensus around fiscal policy choices now and in the future. >> and if the fiscal positio the united states deteriorates further or if the political gridlock becomes more entrenched, then that could lead to a downgrade. >> reporter: still, there's no sign of a partisan truce. >> this is essentialal tea party downgrade. >> this is essentialal tea party downgrade. the tea party brought us to the brink of a default. >> well, if they'd listened to the tea party, we'd have $4 trillion reductions in debt over time and not been downgraded. >> reporter: the financial fallout starts as the world markets open for monday fallout starts as

according to experts, the down grading by standard and poors was a logical next step. s and p down graded debts on friday. >> there is a serious problem it's perceived to exist. >> john holmgren is the former president of the california mortgage bankers association. >> this is going to affect the cost of credit and the long run. and it could affect our economy in the long run and people have less confidence in the u.s. economy. and that is implications for home prices among other thing autos fanny fray mai and freddie mac own, or guarantee about half of the u.s. mortgage asks account for nearly all loans. and this is a expected to push rates higher. john lawson is senior vice president for credit and risk with san ram yom's commerce bank mortgage. >> for 10 year and 30 year fixed rate arks justable 5-1 rate they're going downward as much as foif seven basis points today this, is having a positive neglect on people who want to refinance. >> that may be a short term benefit to some, it may be in the minds of consumers. >> there is a reduction in the number of people that s

today standard and poors issued a downgrade to double a plus. s&p's top man behind the decision will join us to tell us why. the white house got wind of it earlier, trying this evening to challenge the assessment saying that s&p's model was off by million. the treasury spokesman saying a judgment flawed about a $2 trillion error speaks for itself and john king will join us shortly, these guys make congress look good, talking about s&p. but it is congress that they need to be taking specific exception to and washington politics. from their news release, the brinkmanship highlights what we see as america's governance and policy making becoming less stable, less effective and less predictable than what we previously believed. the agency says that produced a weaker long-term reduction plan needed. it slams democrats and republicans from being unable to agree on deeper cuts and discretionary spending and the ability to reach entitlements. quoting again, quote, we have changed our assumption on this because the majority of republicans in congress contin

and always will be a aaa country. >> you've notice there had, the president dismissing standard & poor's downgrade and certainly not the only one. son the defensive right now, drawing fire from many quarters. mary snow takes a look. >> reporter: three credit rating agencies, same facts, three different outcomes. the last time standard & poor's, moody's and fitch gained so much attention was when they were slammed for giving top ratings to mortgage-backed securities. the bipartisan financial crisis inquiry commission concluded that the three credit rating agencies were key enablers of the financial meltdown. standard & poor's also gave lehman brothers an "a" rating before its collapse. its credibility is under fire from both the right and the left, after its downgrade of u.s. debt. the federal government challenged its calculations. >> look, s&p's track record has been terrible, and as we've seen this weekend its arithmetic is worse. >> standard & poor would have forfeited its good repetitiutatf it had a good reputation to forfeit, it having missed the entirety mortgage-backed securities problem on its nose. >> s&p is on the defens

standard and poor's says the government is spending too much and has too much debt so a downgraded us standard and poor's says that washington didn't raise the debt ceiling fast enough or cut spending deep enough and s. and p. cited rising public debt policymaking uncertainty and failure to deal with spending on entitlements as major factors in its decision so why is that the standard and poor's is calling out the republicans and all these local t.v. stations are calling out the spending but the problem with the american media by and large fickle of the mainstream media is something called access and dirty little secret of the media is that if you're doing a kind of show that only works if you get big name republicans on it then you have to be willing to suck up to them and not call them out on the lie on the air this is why networks and t.v. performers end up worrying about not losing their position in the competitive media landscape or saying something that would alienate their sources so they back off from hoarding the difficult truths and simply focus on political rhetoric and strategy in a recent column paul krugman a guy who doesn't need to suck up to republicans to keep his column in the new

why should we trust standard & poor's when they were so dismally wrong with the derivatives and edna from texas. what's the difference between the standard & poor's rating and the s&p 500 are they not the same? let's go back to gene. >> there's a number of economies and analysts that believe the united states's fiscal situation did not warrant a downgrade by s&p. and that pointed out that germany and britain, and france enjoy a triple-a credit rating. these analysts and economy economists. also believe there are issues of credibility. because the rating agencies leading up to the financial crisis did give stellar credit scores to subprime mortgages and derivatives in the end it was found out were of very little if any value and that was key reason why the economy went into deep recession and why there was a financial crisis. host: i jumped the gun on the earlier e-mail but a basic question about standard & poor's. what's the basic difference between this and the s&p 500. >> it's a stock index. s&p 500 has top u.s. companies in it so it's a stock barometer and it's tells us how stocks are doing. the s&p rating agency looking at the debt side. so one is on stocks a

s&p's number. what they're calling a $2 trillion mistake in calculating deficits. but this was a back and forth that went between treasury and standard & poor's. and standard & poor's said it stood by the downgrade. the other thing you're hearing from white house officials and surrogates for the president, because s&p really cited that very chaotic process that really took us to the last minute of getting that debt ceiling deal this week, you heard white house officials blaming house republicans for being in their words, very uncompromising. so certainly pointing fingers there, christine. >> and it sounds like there will be no more uncertainty about who will be running the treasury secretary. >> this was pretty interesting. speculation whether secretary geithner would go. his answer was that he would be here for the foreseeable future, didn't do a whole lot to clear that up. it has been cleared up. he will be staying on. we're told into fall of 2012. so election season. and white house secretary jay carney put out a statement saying the president himself asked treasury secretary geithner to stay and welcome the news that he is staying. >> tha

exelonpatch.com to learn more. >>> the s&p downgrade was a purely political act taken by these two leaders of the confederacy of dunces known as standard & poor's. john chambers andearce is the head of the sovereign credit ratings division of s&p. what john chambers and david bearce, the most incompetent analyzers of american debt in history failed to understand is that the debt ceiling has always been a political bargaining chip. the political game in the debt ceiling just has never been played quite as loudly as it was played this year. the incompetent, politically illiterate john chambers and david bearce offer as a basis of their utterly wrong downgrade, nothing but the political worry that maybe congress won't raise the debt ceiling the next time it has to. >> that was lawrence on monday issuing a blistering critique of s&p's downgrade of america's credit rating. today we know even more about s&p's flawed logic, and who else can share in the blame for the credit agency's clumsy move? standard & poor's director told politico, people in the political arena were even talking about a potential default. that a country even has such voices, albeit a minority, is s

and lease the jetta s for just $179 a month. ♪ visit vwdealer.com today. difficulties in bridging >>> here's a look at this morning's top stories. standard and poor'ses in bridging political differences as a major reason for down grading the u.s. government's credit rating. s&p lowered the ratings from aaa to aa+. >>> a 9-year-old boy is in critical condition after being struck by a hit-and-run driver. a family was walking to their hotel after leaving a giants game thursday night. the driver of the toyota, 21-year-old andrew vargas was arrested >>> east palo alto kids will soon be shredding the ramps at a brand new skate park for the official breaking ground yesterday for a 5,000 square foot skateboarding center. work has already started and the park should be completed in about three weeks. funding for the project came from the city's hotel past. professional skateboarder tony hawk also pitched in some money. >>> tech giant google clearly loves lucy. check out this charming video tribute. >> gee, this'll look great in my memoirs. i was a woman for the fbi. >> today marks what would have been lucille ball's 100 birthday. it marks the 60th anniversa

s&p, standard and poor's, it's already assumed that standard & poor's is going to downgrade the u.s. credit rating. that's really not what's getting wall street down at this point. it really is these economic figures that continually keep on coming in, showing that there is really broad weakness in this economy. >> alison, stand by. we will watch what's happening on wall street. we'll take another quick break. labored breathing ] [ coughing continues ] [ gasping ] [ elevator bell dings, coughing continues ] [ female announcer ] congress can't ignore the facts: more air pollution means more childhood asthma attacks. [ coughing continues ] log on to lungusa.org and tell washington: don't weaken the clean air act. >>> the united states senate has passed the language, the legislation raising the nation's debt ceiling overwhelmingly. the vote, 74 in favor, 26 opposed. a decisive victory for the senate majority leader, senate minority leader, both of whom supported this legislation, harry reid and mitch mcconnell. the president of the united states getting ready to go into the rose garden

and at the same time that the standard & poor's lowered the u.s.'s, you could consider them grading congress and giving them a "d" for dysfunction. all throughout their statement, they talk about what's happened in congress, this long, drawn-out debate to reach this debt ceiling deal. and that's left them pessimistic that the two parties can come together and agree on cuts that are going to be necessary to get these big, big cuts. so it's hard to say what's going to happen, say, on monday or when the asian markets open tomorrow. but certainly it's not going to change overnight this grade. it's all going to take these two parties coming together, which is what the white house is urging, joe. >> athena, felicia, thanks so much for that reporting. we were all working on this last weekend and we thought it was over, but it's not. so let's stay tuned. >> oh, no. >>> patience can be key when you're trying to get the best travel deal. that's especially true when you're bidding for the best price. alison kosik is on the go. >> reporter: when the phone rings

s&p made. >> reporter: literally it was a judgment call. that's what standard & poor's does among other thins. they judge. like an umpire. except in this game it's n n ball and strikes for the batter it's financial stability and reliability. and at that s&p says the u.s. struck out. so what is this s&p, this private company, with roots that precede the civil war? why does it, and the agencies like it, most notably fitch and moody's, why do they have such power? >> these companies have been around for quite a long time. and the paradox is the government has essentially increased their importance. >> reporter: that's because it's the government that issued rules requiring certain huge investors like insurance companies and banks, to invest only in securities that had higher ratings. and somebody had to do the rating. >> this essentially imbedded the importance of these ratings in the entire investment arena. >> reporter: which is not to say their track record is perfect. as predictors of whom you can trust to pay back a loan or not, they've had big missteps. >> during the enron and worldcom crises, all of the ratingg agencies performed woefully. >> reporter: t

major asian stock markets fell sharply partly in response of the standard and poor's gown grading of the u.s. credit rating an the dow and sres are down this morning. an elderly woman and her care give remember in the hospital this morning after suffering severe burns in a fire in san francisco. and investigators believe that it started in an upstairs bedroom. possibly caused by cigarettes. >>> and ed lee is expected to make it official at 9:00 this morning. that he will run for mayor of san francisco. the chronicle reports that lee has decided to seek election to the office to which he was appointed. >>> good morning, bay area. just getting up on this monday morning. we've got gray skies, again, no big surprise there and i don't think we will have major surprises all week long as we see more clouds and low fogs along the coastline and onshore overnight and pretty thick toward the coast with some drizzle, too. and by the afternoon, plenty of sunshine inland and in the 80s in some spots and inside the bay, a mixture of sunshine and clouds and 60s and 70s toward the coast and socked in with the low clouds and fog. and 59 deg

s&p, standard and poor's, moody's, we will have to wait awhile to see what they do. a lot of people assume at some point they might but it's by no means a done deal. >> reporter: absolutely not. they will probably hold on their hands, this is a very good deal for the starting process of cutting the u.s. deficit, but they are going to look three, six, five years out and say what is the deficit likely to be and how is the u.s. trying to deal with it. i expect moody's and s&p will wait before they would make any major decisions. certainly not after a massive arrangement deal like this. >> i know you were impressed, richard, with the way the house of representatives voted on this yesterday. what did you think of the way the senate operated today? give me your outsider's perspective. >> reporter: the senate is always so genteel about the way they do these things. the house, a lot more rambunctious. it is so similar in many ways to the house of commons and the house of lords. lots of gentlemen, the noble lord from the upper chamber and a good old fist fight from the other

standard & poor's, moody and fitch were questioned were when they were slammed for the ratings of mortgages. 5 standard & poor's also gave lehman brothers an a rating before its collapse. the federal government challenged its calculations. >> look, s&p's track record has been terrible. and as we've seen this weekend, its arithmetic is worse. >> standard & poor would have forfeited its good reputation if it had a good reputation to forfeit. it missed the entire mortgage-backed security problem right under its nose. >> s&p is on the defense. >> george will and everybody else who has an issue with our ratings should take some time to actually look at the track record of our government ratings, particularly our ratings on national government, the group that i head. >> nyu economy professor lawrence white who's been critical of the agency says s&p has been slow in downgrading countries like greece, but he finds the country ratings yenly on target. >> the reputation issue is really a two-piece issue. there's the mortgage-related security where is they clearly messed up, but there's this other area where their reputations are still intact. >> reporter: s&p has been looking for the $4 trillion in debt deal, far more than the $2 trillion a

this weekend about the future of interest rates and the stock market after standard & poors downgraded the nation's credit for the first time in its history. s&p, though, is one of three credit agencies and the others did not follow suit. many say because of that the impact of the s&p decision could be moderate. kimberly is in menlo park with the latest on that for us. >> reporter: financial experts we talked to say while it is a blow to the country, in the end the u.s. will rise and hopefully learn from its mistakes. as a bitter debate unfolded in washington over debt and potential default, standard & poors warned the white house and congress needed a $4 trillion deficit reduction plan to keep a aaa rating. but in the final hours, republicans and democrats struck a deal half that size. and so late friday, s&p followed through, lowering the u.s. long-term credit rating one notch to aa+. harsh reactions came quickly. china, a major creditor said america must cure its addiction to debt. a visiting scholar at the uc berkeley said in in spite of though rating downgrade the u.s. will remain on top. if this happened to any other country the result

poor. we'll be right back. (cheers and applause) >> (cheers and applause) >> welcome back. remember, remember a few weeks ago standard & poor's downgraded parker's credit rating. guess what, s&p, payback's a bitch. >> the justice department is reportedly launched a probe into whether standard & poor's credit ratings agency improperly rated mortgage securities giving them intentionally higher ratings while knowing they were troubled in the leadup to the world financial crisis. >> what? what's up, s&p, tell me how our ass tastes. you mess with you, you mess with you. you're meat. and by meat i mean we launched a probe and you may be subject to several depositions by government officials. plus interviews by investigators that in some cases could lead to fines. obviously it's a negotiation in many respects. the point is there is a strong chance your name will end up in a scathing editorial on page a 17 in "the new york times". sorry s&p, but revenge is a dish best served slow and with a great deal of bureaucratic paperwork. (laughter) you really thought you could downgrade the united states of america and walk away. wait, where are you going? in fact, i can only think of one th

. >> and just in the last hour fitch has come out and we are it wag for s&p, standard & poor's which ve of the rating agencies and threatening downgrade unless $4 trillion and depending how you count this, is s&p significantly assuaged by the idea this is a down payment on the future deficit and other ftax reform ad other revenue measures that might lead to greater savings over time. >> what about the outlook of jobs? because the president immediately pivoted to jobs, and many would say that is a political statement, and nancy pelosi had a news conference on this very subject that they have to address the jobs crisis which is political and economic problem. the jobs numbers are going to come out on friday and impossible to predict at this stage, but we have seen a significant softening of the economy this the summer months. >> right. if you look at a what is happening with the market today, you can see that it sold ought a reasonably significantly and on the day of the negative was removed from the economy of the potential default that the market would rally, and in fact, fell off som

s conclusion. >> our problems are imminently solvable and we know what we have to do to solve them. >> that pleased the head of standard and poor's. >> it was a renewed sense of urgency we heard from him was encouraging. >> s&p downgraded from aaa to aa-plus. >> mortgage giants own or guarantee half of american mortgages, rates could rise, driving down home values and sales. >> the markets continue to believe our credit status is aaa. >> reporter: in fact, as investors dumped stocks, many bought u.s. treasuries, the same bonds downgraded by s&p. still seen as super-safe. i'm steve handelsman, nbc news, washington. >> we'll have more on all of this coming up in business. but first, england's prime minister, david cameron has rushed home early from his vacation in italy to deal with the riots that have wreaked havoc on london streets for a third straight night. and now it's spread to other areas in the country. police are stretched thin and they're warning residents to stay inside. kerr simmons from our english broadcast partner, itn, has more. >> reporter: despite the condemnation and calls for calm, there are fires burning across

where the administration says that it pointed out what it calls an error to standard & poor's in some calculations and that said it would go back and look at it and ultimately still made the decision to downgrade the united states. can you give us some context around that? >> sure. this is about technical assumptions that the congressional budget office uses in looking at in its own nonpartisan way medium-term and long-term fiscal trends in the united states. and they have two sort of baseline sets of assumptions. we were looking at one set of assumptions. we talked to treasury and agreed with treasury that another technical approach looking at it made sense and we adjusted our projections on that basis, ran it by our rating committee and concluded that the rating should be cut on the basis of those revised assumptions. >> so you take issue with the fact that it's an error? >> well, these are assumptions, these are projections going long into the future. and there are different ways that reasonable people can look at them. and so this was a set of technical issues. it's not a question of who's right or wrong

. >>> standard and poors down graded google's stock rating from buy to sell. s&p says google's decision to buy motorola is risky. the $12.5 billion includes 17,000 patents that could help google defend itself against rivals. but s&p says it would ultimately hurt google's bottom line. not all analysts are on the same page though. >> i can tell you over the long-term google has a history of increasing earnings, and stock prices tend to go up if earnings go up. >> as of today, 33 analysts rate the mountain view company as a strong or strong -- as a buy or strong buy. it is a little more than $18 a share, about 3%. >>> bay area home sales took a big hit last month. the real estate tracking firm says sales dropped nearly 14% from june to july with just under 7,000 houses and condos changing hands in that period of time. analysts say the decline from june to july is normal, but the numbers were down more than usual due to the uncertainty in the economy. it should be noted that home sales were 2% higher last month over july of 2010. data quick says the median home pric

been watching the stock market sell-off all day and many blame the downgrade by the standard & poor's rating agency, and tim geithner on sunday called srrible judgment. john harwood sat down with secretary geithner joining us from washington. we flow that, joknow, john, tha is angry about the downgrade, and how much of it has to do with the additional downgrade of fannie and freddie? >> well, both of those are implicated in the downgrade and as alan greenspan said, it is a blow to the american psyche and you see that reflected and you also see the troubles in europe with a full-blown debt crisis even though the central banning said they would intervene and try to prop up italy and other countries there under distress. this is a huge problem for the obama white house, for investors around the country, and for average americans who have to wonder right now whether this reflect reflects the headwinds in the economy that might affect them on job front, the unemployment front and also growth. >> john, as we get closer to the closing bell, we watch this systematically ticking down below 600 and since the beginning of talking the you, we hav

and fitch and s&p are paying to get those ratings. so the critics say it's a very cozy relationship. remember, standard and poor's got hammered.ause back in 2008 they actually gave trip hell a ratings to those mortgage-backed securities just before those imploded and they gave lehman an a right before it went bankrupt even back during enron they didn't downgrade enron stock until four days before that bankruptcy. today, the managing partner of s&p responded on fox. watch. >> for 100 years rating governments we have been rating corporations, we have been rating structured finance deals. we stand by our record. oobviously we are disappointed with what happened with the mortgage-backed securities but, you know, it's not as if that influences the decisions that we make forward. >> the bottom line here is that when you have credit rating agencies that are both policing and promoting companies, experts say that creates a lot of gray area, shep? >> shepard: trace gallagher live tonight in los angeles. thank you. for the first time in five years, the united nations has flown relief supplies into the war-torn capital of somalia. that e

standard and poor's. but now his administration has to convince the world and s&p the united andcc1: states is still a sound investment. aaa tripped our nation'scc1: rating, dropping us into an newcc1: t league with zealand and belgium. >> it's about the difficulty of all sides in finding, you know, a consensus around fiscal polic: choices now and in the future. >> and if the fiscal position of the united states deteriorates further or if the political gridlock becomes more entrenched, then that could lead to a downgrade. >> reporter: still, there's no sign of a partisan truce. >> this is essentially a tea party downgrade. the tea party brought us to the brink of a default. >> well, if we listened to the tea party we'll have $4 trillion reductions in debt over time and not been downgraded. >> reporter: the financial fallout starts as the world markets open for monday business. >> the initial reaction in my judgment is going to be negative. >> reporter: experts expect an increase in interest rates and the whole world is watching to see what happens next. brian mooar, nbc news, washington. >> we're also learn

and fitch will not downgrade. we'll see if s&p does. but independently, it is still important but it means less than if we saw, say, standard & poor's and moody's, downgrade the rating, john, and i think that is a very, very important point. at the same time i think it's important when you look at where americans have been putting their money, when they pulled out so aggressively of the market yesterday and we saw the biggest decline for stocks that we've seen since the financial crisis, where did people put their money? they put their money, interestingly, in u.s. treasuries, in government bonds, so much so that one-month t-bills were getting a negative return. people were paying the u.s. government to hold their money. if we see a downgrade, you will see a dramatic shift and people will be going away from what they thought was a flight to safety in treasuries and they will be looking for another safe haven for their money. they don't feel like that safe haven is in the stock market, if they don't feel like that with the u.s. treasuries. the question is where do they feel like their money is safe, john. >> and allan, it's remarkable, y

the s&p thinks the deal fell short. after standard and poor's downgrade, the obama administration fired back saying the s&p figures were off $2 trillion. s&p says its decision to downgrade stays. what is next? where do we go from here? felicia taylor is live in new york. this credit downgrade is a stunning wake-up call. >> reporter: completely. we had a aaa rating in this country since 1917. this now means that those countries that invest in the united states have a rating below that of britain, france, germany and canada. that makes it a risky proposition to invest in the united states. the reason this is important is interest rates could go higher in the short-term. any kind of investment, credit cards or insurance payments, is going to be at risk. that's why this is critical for every consumer in this country. it's not just about investors and the economy. it is about the entire country overall. what washington now needs to do is get back to work and figure out how that debt deal is really going to work out and satisfy the rating agencies suc