The Journal Hypes the Downgrade

A three-day-old story gets the overkill treatment

That Standard & Poor’s downgraded the U.S. from AAA to AA+ is a big story no doubt. But The Wall Street Journal on Monday went overboard, devoting almost all of the first seven pages of the paper and a good chunk of the Money & Investing section to the downgrade, which happened three days earlier.

Bannered across six columns atop A1: “Markets Brace for Downgrade’s Toll.”

On A3, the paper swipes at Obama’s “Political Perils”, despite the fact that the deficits were mostly created by Republicans. The caption on a photo of a downcast-looking president:

Republicans are blaming the S&P downgrade on President Obama, shown returning to the White House from Camp David on Sunday.

At the bottom of A3 we get a whole story about how the S&P downgrade was rumored on Friday and the rumor turned out to be true.

Turn the page and it’s a giant (and well done) story, “Obama and S&P Vie for Credibility.”

On A6, “Firms Look to Raise Cash as Volatility Rises” is pegged to the S&P downgrade despite the fact that the Journal reports it’s not expected to raise corporate borrowing costs, at least in the near term.

Below that, we get a speculation piece telling us “Collateral Damage Could Include Higher Mortgage Rates.”

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers.

Or they could potentially go down, and you guessed it: That’s what they did.

On page seven the big story is “China Takes Aim at U.S. ‘Debt Addiction.’”

You’d think the world was ending or something. Instead, investors disregarded S&P’s downgrade and poured into U.S. Treasury bonds on Monday, sending yields down to near record lows. Stocks took a pounding, but it’s hard to blame much of that on the downgrade when bond investors sent U.S. yields down (particularly when Europe and our biggest banks are teetering and the economy is tipping toward recession). It wasn’t exactly a shock that that happened, either.

But blame it on the downgrade the Journal did, doubling down yesterday with another six-column headline atop page one:

Downgrade Ignites a Global Selloff

Here’s the lede:

The downgrade of the U.S.’s credit rating sparked a global selloff on Monday, pushing the Dow Jones Industrial Average to its sharpest one-day decline since the financial crisis in 2008.

You have to wonder what sparked the 512-point decline on Thursday. Anticipation of a downgrade that would make it cheaper for the United States to borrow?

Investors have learned not to give undue attention to credit raters like S&P after seeing them utterly discredited in the housing crash. Why hasn’t the WSJ?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,