They finally called the King (US) on his clothes.

Yes you can say they didn't do their job (none of the big 3 of rating agencies did) on Housing, Banking, Differentials, Hedge and on the other debacles we have had, but now S&P is "BREAKING THE LINE"  and starting to be more truthful.

It is the others and our Congress and President that have their heads in the sand that are remiss.  S&P's action will put pressure on the others now to face the facts.

Investors Flee Risky Assets in 1st Trading Since S.&P. Move

Downgrade Is Likely to Add Urgency to Debt-Cutting Panel

And Obama's contribution?

In his first public remarks since Standard & Poor's downgraded the country's debt on Friday, Mr. Obama sought to instill calm and a sense of debt-cutting purpose, even as the stock market was plunging. "Our problems are eminently solvable and we know what we need to do to solve them," Mr. Obama said, in remarks to reporters at the White House.

"What we need to do now is to combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare.

"Making these reforms doesn't require any radical steps," he said. "What it does require is common sense and compromise."

Mr. Obama acknowledged that his defense of the country's credit worthiness "doesn't mean we don't have a problem."

"We didn't need a ratings agency to tell us we need a long-term approach to deficit reduction," the president said. "And we didn't need a ratings agency to tell us that gridlock in Washington has not been constructive to say the least.

"We knew from the outset that a prolonged debate over the debt ceiling, a debate where the threat of default was used as a bargaining chip could do enormous damage to our economy and the world's," he said.

He has confirmed his belief that S&P had the right message, and also confirmed that he still thinks austerity, contracting the economy, is the right way to go.  

From David Dayen:

But the main news in this speech was that Obama intends "to put forward my own recommendations in the coming weeks on how we should proceed." And he pretty much tipped his hand as to what those recommendations would be. He said that the deal already trimmed much in the domestic and defense discretionary budgets, and that there's "not much further we can cut in those categories" (a debatable point on defense, to say the least). So Obama implied that the Super Congress should concern itself with "tax reform and modest adjustments to health care programs like Medicare." He name-checked the Bowles-Simpson recommendations and the Gang of Six as examples of good proposals, as well as his aborted grand bargain with House Speaker John Boehner. And he said that the sense of urgency for the Super Congress to act has been raised with the S&P decision.

I don't know how much clearer this can be made. Obama wants to implement his grand bargain, or at least key elements of it, through the Catfood Commission II, and he's going to give specific proposals on paper to that end. These will include cuts to health care programs.

The second half of the speech attempted to pull off a pivot to jobs. He cited the need to extend two key stimulus measures, the payroll tax cut and extended unemployment insurance, by the end of the year. He used statistics floating around in left-leaning think tanks as well as conventional economic analyst shops, in saying that a failure to extend these two measures would result in 1 million fewer jobs and 0.5% less growth in GDP. And this is true, though it's important to note that simply extending current law is not on-net stimulus, it just makes fiscal policy anti-contractionary rather than expansionary.

so, S & P may well have succeeded in a twofer: screwing up the stock markets, and crushing the rate of return in the bond market.

Maybe it won't matter in the long run, but righ now, markets are in a tailspin.

Stocks on Wall Street plummeted on Monday, following global markets lower, as skittish investors reacted to last week's unprecedented downgrade of the United States government's credit rating.

The declines, coming in the first opportunity for investors to sell since Standard & Poor's cut its rating on the nation's long-term debt late Friday, set the equity market on track to extend losses that were beginning to recall the days of the 2008 financial crisis. They also reflected anxiety over the United States economy and Europe's debt woes.

Following a dismal showing in European and Asian markets, the broader United States equity market as measured by the Standard & Poor's 500-stock index was down 43.88 points, or 3.66 percent, in afternoon trading. The Dow Jones industrial average was down 314.85 points, or 2.75 percent, and the Nasdaq was down 94.94 points, or 3.75 percent.

The S.& P. 500 was down about 14 percent over the last 11 sessions, one analyst noted, bringing back echoes of the last financial crisis. Last week was the worst five-day trading period since November 2008.

Also, this could bully policy makers into dumping the Bush Tax Cuts since that is listed as the #1 culprit in all this.  Why not bring that up?

Or say a whole bunch of nothing, but look reasonable and adult while saying it?