Unhappy with an S&P downgrade? Then fire them
The Obama administration was angry when S&P downgraded America's credit rating from triple-A to double-A plus. Some local governments had their ratings downgraded and now they're taking action against S&P. CBS News correspondent Bill Whitaker looks at what those governments have done in reaction to the downgrades.
Los Angeles Mayor Antonio Villaraigosa toured a once-foreclosed and derelict house rehabbed with federal stimulus money, as part of the Neighborhood Stabilization Program. It was fitting for a mayor doing a little housecleaning of his own.
He fired Standard & Poor's, after the ratings firm downgraded L.A.'s $7-billion investment portfolio from triple-A to double-A.
"We balanced this budget in the face of the toughest times in the city's history," he said at the time, "in the face of all the skeptics who thought it wouldn't be possible. So we are cutting our relations with S&P.
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Los Angeles isn't alone. Standard & Poor's downgraded the investments of 14 states, cities and counties. Two others joined L.A .and fired the firm.
"They have no credibility with regards to how they decide to rate," said Sandie Arnott, treasurer of San Mateo County in California. "I think that is very questionable."
State and local governments hire ratings agencies to grade their fiscal health -- a kind of seal of approval to attract investors.
S&P said it made the recent downgrades because the cities and counties had "significant exposures" to U.S. government securities. That means they were heavily invested in U.S. treasury bonds.
When S&P took the controversial step to downgrade the U.S. government's rating, the trickle-down effect was to lower the value of municipal holdings.
L.A. uses investment earnings for things like infrastructure repair and police overtime. The mayor dismissed S&P's action.
"As far as I understand, it won't have any affect," said Villaraigosa.
As for the treasurer of San Mateo County? "I've lost a triple-A rating," said Arnott. "And they've lost my credibility rating."
The two other major ratings firms still rate L.A. and San Mateo triple-A.
