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What a day.
Stocks finished Monday mostly miserable with investors unconvinced by President Obama's comments that the U.S. remained a "triple-A" country despite its debt being downgraded.
The broad markets lost more than six percent of their value Monday, the first trading day after Standard & Poor's decision to cut the U.S. credit rating.
After starting off 2 to 3 percent earlier in the day, losses accelerated in the afternoon after the president's remarks. A late afternoon mini-rally could not be sustained.
In Minnesota, local
governments watched markets closely with a mix of caution
and frustration. S&P's move to downgrade U.S. debt could cascade down to state and local governments making it more expensive for them to borrow money in the future.
News on that could come today and it doesn't sound good.
Obama: The problem is a lack of political will in Washington, a refusal to put what's best for the country first...Jon Gordon, MPR NewsAug 8, 2011 at 12:56 PMBloomberg News is reporting that S&P
is likely to cut its ratings on municipal debt secured by the federal
"Of course the concern for us is will the rating agencies look at the creditworthiness of the local issuers one by one, and look at their individual story ... or whether, because the federal government is downgraded, that means all the local issuers will be downgraded as well," said Lee
Mehrkens, Ramsey County's chief financial officer. "We don't know. There's a great deal of uncertainty about it."Gary Carlson with the League of Minnesota Cities notes that Moody's Investor Service, another big rating agency, had put several cities and schools districts in Minnesota on notice in late July that their coming debt offerings could be downgraded if the federal government's rating took a hit. (So far only S&P has downgraded U.S. debt.)
Moody’s recently downgraded
its outlook for
Minnesota's state finances given the state’s use of one-time fixes to
close a projected budget gap. Those fixes included changes that could force local school districts into short term borrowing.
RT @JPRennquist: Gold is up $1700/ounce today? What's happening w/ key MN commodities - iron, grain & timber, etc? @MinnEcon #SandPMNMinnEconvia twitter on Aug 8, 2011 at 12:42 PM
The stock market reaction did help buoy bond prices and improve interest
rates, "which is great for housing affordability but this is a short-term thing.," said Twin Cities Realtor Aaron Dickinson.
"The Short-term concern, I think, is more that household wealth has
just been killed the last few days and may put some people on the sidelines for
a while till they feel more secure about the economy," he said. "For those with nothing in
the stock market, the rate improvements may encourage them to jump