Could Moody's be any more incompetent?

real_Skankhunt42's picture
real_Skankhunt42 - Certified Professional
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So, is Moody's looking for a reality show? This has to be the most incompetent group of people in New York, a state run by incompetent and corrupt people. After it's moronic downgrade of U.S. debt, a time when investors have never put more confidence in U.S. debt, Moody's chasing some crazy idea that a sex scandal, which will blow over in about 4 weeks, will affect in any way PSU's ability to service debt is about as dumb and pathetic as it comes. This will not impact PSU fundamentally in any way whatsoever.

It's as if Moody's is seeking publicity or something as its CEO went all over TV several months ago parading its lunatic theory on U.S. debt, which the other rating agencies and investors have laughed at.

http://www.

Moody's Investors Service said it may downgrade the credit ratings of Pennsylvania State University in a sign of the potential scope of the fallout from a sexual abuse scandal at the school.

The agency on Friday said it will consider whether to lower its assessment on the university's $1bn of debt, which is now rated Aa1, just one notch below triple A.

The Pennsylvania attorney-general has filed criminal charges involving child sexual abuse against Jerry Sandusky, a former assistant football coach, as well as perjury and failure to report charges against two senior university officials, including the chief financial officer.

The university board this week fired Penn State's president and Joe Paterno, the school's beloved head football coach, who has been criticised for not doing more to stop the alleged abuse.

Mr Paterno coached the "Nittany Lions" team for nearly five decades. His programme was revered as one of the most successful and ethical in college sports.

"Higher education is first and foremost a business that is driven by reputation," said John Nelson, head of higher education research at Moody's. "Student demand, the attraction of faculty and the ability to draw donations are all based on reputation."

Moody's said it will evaluate "the potential scope of the reputational and financial risk" arising from the allegations, including potential lawsuits and settlements, weaker student demand or philanthropic support, changes in the university's relationship with the state and significant management or governance changes.

The university now carries high ratings because it has been popular with prospective students, top professors and generous donors, but also because of its efforts over the past 20 years to develop its research capabilities. The university owns the Hershey Medical Center, a hospital that contributed 26 per cent of the school's $4.6bn in operating revenues in the year ended June 30.

Penn State's football programme contributes about 2 per cent of revenues. Additional large contributors are tuition and other student-based revenue at 40 per cent and federal research grants at 19 per cent. The university receives 7 per cent of its operating revenue from the state government of Pennsylvania.

"The football programme does not have a large direct financial impact compared to other business lines," Mr Nelson said. "The larger potential impact of recent events is reputational."

Officials at the university could not be reached for comment.

Comments (8)

Nov 12, 2011

with the top coach gone, PSU not only would start losing games (and thus money), they could start losing revenue off its sports merchandise and sponsors as for the time being, nobody wants to wear or display something associated with "sexual abuse". reputation means A LOT. they'll need it to retain top players. it would make it harder for them to pay off any debt.

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Nov 12, 2011

goldman, Paterno hasn't actually "coached" the team in about 8 years. And the vast majority of PSU's football revenue comes from fixed TV contracts from their Big Ten contract. This will not in ANY way impact PSU's ability to pay its debt. In fact, PSU packed its stadium when they sucked several years ago. That's a football school through and through with a gargantuan fan base. Not to mention that a STATE university--the flag ship of Pennsylvania--would never be allowed to default. Shows how absolutely absurd Moody's is.

I went to Virginia Tech--class of 2007--during the murder of 32 students by another VT student. It had zero material impact on VT. There were something like 20 students who declined their admission as a result. A state university in particular is so much bigger than any news article of the day.

Nov 12, 2011

monkolony, downgrading U.S. debt made no sense at all whatsoever. Their justification was basically "political risk" because politics was making it unclear if Congress would raise the debt ceiling in the future. This is a gross, oversimplified justification for downgrading U.S. debt, especially since it is mathematically incorrect. If Congress fails to raise the debt limit then other programs would automatically get cut across the board in order to finance debt payments. It's an argument made by people who are purposely lying for publicity, and with the way the CEO hit the airwaves it was pretty clear that the debt downgrade, which the rest of the world laughed at, was a publicity stunt by amateurs. And this isn't even hitting on the fact that something like half of U.S. debt is owed to ITSELF.

In addition, the U.S. has full taxing authority with a lot of room to grow historically. And I don't exactly know if you understand how interest rates operate, but it's supply and demand. Investors are buying up 30-year T-Bonds like they're going out of style. That is, the people who put their money where their mouth is are not concerned about soverign U.S. debt default in the next 30 years.

Nov 12, 2011

Wow, you're so off on this that it's absurd. First of all, the U.S. Treasury Department has a ton of room to finance programs at its discretion. It's always been well understood that the first thing the Treasury would pay is its debt obligations. If it didn't then the Secretary would probably be impeached or forced to resign. Second of all, it DOES make a difference what investors are doing. They are taking all available public information and using their OWN money to place bets on future performance. You can sit on a message board or behind a desk at Moody's and say, "Well, things look bad." But investors, largely institutional investors, use their OWN MONEY and expertise to place bets on U.S. fiscal health. As it stands, we are looking at among the lowest long-term interest in the history of our nation on soverign debt, which says a lot.

No one is arguing that the U.S. has well managed finances. What we're arguing is that the downgrade by Moody's was absurd and was done transparently for publicity. Not to mention that Moody's reasoning was completely moronic (that Congress wouldn't be able to consistently raise the debt ceiling; therefore, the U.S. is in constant threat of debt default. You'd think that these Ivy Leaguers would have at least a base understanding of how Washington, D.C. works).

Nov 12, 2011

Dude, you're an ignoramus, with all due respect. Let me break this down for you one last time.

1) Moody's reasoning for downgrading U.S. debt was because Congress and the President have been fighting over raising the debt ceiling.

2) The U.S. Treasury, whose head is appointed by and answers to the President of the United States, has the authority to make financing decisions at its discretion.

3) Therefore, the only way the U.S. defaults on its debt is if the President of the United States of America allows it to.

It's that simple. Trying to explain this to you is like trying to explain to a 98 lb Persian club rat why his pick-ups lines don't work on super models.

Nov 12, 2011
Virginia Tech 4ever:

Dude, you're an ignoramus, with all due respect. Let me break this down for you one last time.

1) Moody's reasoning for downgrading U.S. debt was because Congress and the President have been fighting over raising the debt ceiling.

2) The U.S. Treasury, whose head is appointed by and answers to the President of the United States, has the authority to make financing decisions at its discretion.

3) Therefore, the only way the U.S. defaults on its debt is if the President of the United States of America allows it to.

It's that simple. Trying to explain this to you is like trying to explain to a 98 lb Persian club rat why his pick-ups lines don't work on super models.

anddddd the president of the US answers to _______. The pres is nothing more than a puppet, and if you think otherwise, you are naive.

cant keep deficit spending forever. oh and debt to gdp ratio is approaching 100%

Nov 12, 2011

Wow, you've set up so many straw men arguments that I don't even know where to begin.

1) Do I think the U.S. will never default on its debt? It may very well default on its debt sometime in the future, but it's no more likely today than it was 12 months ago when Moody's gave the U.S. a AAA rating.

2) The U.S. won't default on its debt as it stands now because there is a powerful political will in Washington, D.C. to not default on debt. The U.S. Treasury has the authority to prevent default in the unlikely event that Congress and the President can't agree on raising the debt ceiling. The federal government has a lot of room to cut waste and/or raise taxes. U.S. debt is backed by the full taxing authority of the United States government.

3) Moody's reasoning for downgrading U.S. debt was absurd and actually contradictory. In fact, the very fact that there was such a bitter debate over raising the debt ceiling actually demonstrates the initial beginnings of a political will to slow the growth of federal debt. That Moody's would use this as a reason to downgrade U.S. debt is non-sensical.

Nov 12, 2011