Beers: We haven’t been using the term sovereign ceiling for many, many years—going back to the mid-90s or even before. So, as a practical matter in the U.S. and pretty much everywhere else in the globe, the sovereign rating doesn’t necessarily cap the ratings of other issuers.

There are lots of reasons why we think it’s appropriate to think about these issues—particularly the knock- on effects—in a more nuanced fashion. But back in July, in the release that we put out on the 21st of July, we com- mented that overall in the corporate sector we thought that the effect of this—of what had been a hypothetical and now is an actual—one-notch downgrade of the U.S. government was probably going to have the mini- malist effect. That’s because there isn’t a sovereign ceiling in the U.S. or any of the other countries that we rate. There can be indirect effects. They will all be analyzed. But overall, the corpo- rate analysts opine that that sector would probably be the least affected sector of the ones that we were talking about earlier.

Schachne: John Chambers, you referred earlier to past history, about sovereigns that were downgraded and got their ‘AAA’ back. Can you talk a little more about sovereign rating his- tory: how we’ve tracked it, and how we’ve tracked and measured perform- ance of sovereign ratings?

Chambers: Well Bruce, we publish a recap of that every year. After the repeal of the Interest and Equalization Tax, sovereigns began to issue in the U.S. market again. And sovereign ratings

began to take off from that point, which is 1975. And the number of rat- ings has grown since then.

So we’re talking about nearly 40 years of data. We talk about a 15-year cumulative default rate; that’s the longest horizon that we have robust sta- tistics for over that 40-year horizon. We’ve never had a ‘AAA’, a ‘AA’, or a ‘A’ default. Overall, investment grade defaults over the 15-year horizon are something like 1%. And speculative grade defaults are, like, 30%.

So, there are two things I want to highlight. One is that the rank ordering of our ratings is very robust. You can see that in our GINI data. The second is that over a 15-year period, we’ve never had a sovereign default that was rated ‘A’, ‘AA’, or ‘AAA’. Now with Greece, we might get one count. The highest Greece was ever rated was in the ‘A’ category. But we’re very proud of our record and we think it speaks to the strength of our analytics.

Beers: It’s worth highlighting that the International Monetary Fund—going back to the days of the Asian Financial Crisis over a decade ago—has published a number of reports about sovereign credit ratings, including ours. They have repeated the very points that John was underscoring. (Please copy and paste the following URL into your browser to access the report: http://www.imf.org/external/pubs/ft/gfsr/20 10/02/pdf/text.pdf) This isn’t a view of S&P, this is a view of the IMF. The sov- ereign ratings are a very robust indi- cator of credit risk.

Rating actions and also, importantly, our outlooks and CreditWatch indica- tors are useful information to the mar- ketplace. And they’ve also highlighted the fact, for example, that no sovereign that defaulted had an investment-grade rating at least a year or more before it defaulted. And so on.

So I think most independent observers who look at our ratings and look at our methodology understand that the ratings that we have are robust, and certainly ahead of the group. And having a very large and capable team behind John and

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This isn’t a view of S&P, this is a view of the IMF. The sovereign ratings are a

very robust indicator of credit risk.