Last week Moody’s Investors Service threatened to downgrade the U.S.’s Aaa credit rating if the nation fails to raise its $14.3 trillion debt ceiling before August 2.  On Monday the agency counseled the U.S. to scrap its debt ceiling altogether.

Standard & Poors (S&P) and Fitch, the other two major credit rating agencies, have recently echoed Moody’s warning.

Democrats pounced on Moody’s pronouncement as ammunition in Congressional budget talks, citing Moody’s as an unimpeachable source on what to do with our debt ceiling.

Why is anyone listening to what Moody’s has to say about the economy?

Moody’s, S&P, and Fitch are the same credit rating agencies that helped precipitate the subprime lending crisis of 2008.  These bureaus continued to give large financial institutions their highest ratings until the last minute, despite the flimsy cores of these firms’ collateralized debt obligations and mortgage-backed securities.  Moody’s and company thought the Democrats’ Community Reinvestment Act was a splendid idea, with the result that millions of investors lost billions of dollars and the international market collapsed.  read more »