(Photo: Getty Images)

Standard & Poor’s has been the butt of a few jokes on Wall Street lately. Most involve batteries and bra-cup sizes—things that, like U.S. government bonds, are measured in degrees of A’s. They are an indication of the derision that S.&P. has faced since making its bold decision to downgrade the credit rating on the United States of America from AAA to  AA+.

From officials, there was chastisement. “I think S.&P. has shown really terrible judgment and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic U.S. fiscal budget math, and I think they came to exactly the wrong conclusion,” said Secretary of the Treasury Timothy Geithner in an interview with NBC News. By “fiscal budget math,” Secretary Geithner was referring to S.&P.’s miscalculation of future deficit projections by almost $2 trillion. According to The Wall Street Journal, S.&P. “agreed about the mistakes, though they didn’t say whether it would affect the rating.” In the end, it did not, prompting Acting Assistant Secretary John Bellows to write that “S.&P. still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one.”

Among S.&P.’s peers, the downgrade was portrayed as both fickle and tardy. “It’s either too late or meaningless or probably both,” said Sylvain Raynes, a principal at R&R Consulting and former Moody’s analyst, who noted that the downgrade came after the arguments in Congress were resolved rather than before. “You can’t measure the probability of default by the fact that there is a default,” said Mr. Raynes. “You can’t say water is wet. Wetness is the measure of water. When you get to 100 percent—and it’s all wet—that’s not wetness; it’s water.”

Investors seemed similarly unperturbed by the downgrade—the stock market had shown instability prior to Aug. 5, indicating that a causal relationship with the debt rating was unlikely. The bond markets rallied around the creditworthiness of the U.S., with U.S. Treasury bonds outperforming world indices despite the downgrade. Warren Buffett, for one, said he would keep adding to his vast reserves of U.S. Treasury bonds. “Our currency is not AAA, and in recent months the performance of our government has not been AAA, but our debt is AAA,” said a defiant Mr. Buffett to CNBC. He added that the downgrade did not change his opinion about the reliability of Treasury bonds as a safe investment. “If anything,” he said, “it may change my opinion on S.&P.”

In the media, the agency was quickly disparaged for its accounting mistakes, its slow pace in reaching a decision and for employing an analyst who studied the humanities in college (to think!). Others derided the chutzpah of a company whose slipshod ratings during the housing crisis catalyzed the bailout and stimulus packages that helped create the massive debt crisis to begin with. And then, to make matters worse, the S.E.C. announced it would investigate the possibility that S.&P. leaked news of the downgrade before it happened.

After a series of disgraces, in other words, S.&P.’s decision is being seen more as an irresponsible attempt to win credibility—where there’s little left to go around—than an economic game-changer. “This is America. No matter what some agencies will say, we’ve always been and always will be a AAA country,” said President Obama in a statement. And investors seemed to confirm his opinions. So why did S.&P. go for it?

There might have been motivation to indicate that this time the agency was not sleeping on the job. “There was some criticism that this was sort of a finger back in the eye of government saying, ‘O.K., you want to give us a tough time for missing the subprime debt. We’ll show you we still have some cards to play,’” said Eliot Spitzer, who as New York State attorney general investigated ratings agencies. “We haven’t ever viewed them as being political barometers. And so now, in a way, they’re putting on an entirely different hat, saying, as a political matter, they’re downgrading our debt.”

Some analysts see the downgrade as a possible first sign that the underpinning of modern financial practice—the risk-free asset—is losing its prominence.

“The common practice in the financial world is to identify a risk-free asset and use that as a benchmark for pricing, for calculating spreads and for hedging, and to date that benchmark has been the U.S. Treasury market,” said Jerome Fons, an economist at Kroll Bond Ratings.

“Clearly, what we’re all waking up to is the fact that there’s no such thing as a risk-free asset; at some level there’s risk in any asset.”

As such, the ratings downgrade could be the first crack in a system that has been upheld by the mutually shared beliefs of those who maintain it.

“At a symbolic and ritualistic level I think that what Standard & Poor’s did was kind of gutsy,” said Ann Rutledge, the other founding principal at R&R Consulting. “It’s a signal that a conspiracy of silence around the subprime crisis is not over yet.

“The question,” she continued, “is where did John Stuart Mill’s idea of instrumental liberalism take us? It took us to University of Chicago-style market-oriented economics. What happened with the S.&P. downgrade is kind of the first move in a shift of that whole paradigm.”

Or just a loud statement that will soon be mostly forgotten.

“In hindsight this may just be a nonevent,” said Mr. Fons. “Japan lost its AAA a decade ago and nothing really changed. It’s just somebody’s views as to what the risk is. It’s not the truth.”

ewitt@observer.com

Additional  reporting by Foster Kamer

Also, Silverstein Properties announces Moody's will take an extra 80,000 square feet in addition to the 590,000 they already signed on for. Steve Cuozzo of The Post reported that one a few weeks ago.

That means 1.1 million square feet is taken and roughly another 500,000 to go for the city's most valuable downtown office building.

Full-release after the jump.

- John Koblin

SILVERSTEIN PROPERTIES ANNOUNCES TWO LEASE COMMITMENTS AT 7 WORLD TRADE CENTER

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MOODY'S CORPORATION ADDS TWO ADDITIONAL FLOORS

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DRW COMMODITIES TO OCCUPY 8,568 SQUARE FEET

NEW YORK, April 10, 2007 -World Trade Center developer Larry A. Silverstein today announced that Moody's Corporation has agreed to occupy two additional floors of the 52-story, 7 World Trade Center at 250 Greenwich Street in Downtown Manhattan. In addition, Mr. Silverstein said that DRW Commodities will occupy 8,568 square feet on the 34th floor of Downtown's greenest, most modern skyscraper.

The two additional floors, comprising 80,000 square feet, increase Moody's total commitment at 7 World Trade Center to 670,000 square feet. Last September, Moody's signed a 20-year lease for 590,000 square feet at the new office tower -- the largest lease signed in Manhattan in 2006.

DRW Commodities, which currently has offices at One North End Avenue in New York, as well as an office in Chicago, will occupy the 34th floor in one of the pre-built suites. DRW, a member of the New York Mercantile Exchange, is taking space on a pre-built floor that is being leased to small but growing New York City-based companies.

"The addition of two floors for Moody's and the first tenant on the pre-built 34th floor continues a string of recent successes at 7 World Trade Center and for the overall Downtown commercial market," said Mr. Silverstein. "Although the building only opened last May, we have secured commitments for nearly 1.1 million square feet, which represents two-thirds of the building's available space."

Tenants of 7 World Trade Center include:

· ABN AMRO: 30th -33rd floors (140,000 sq. ft.); Move-in projected by early 2008

· Ameriprise Financial: 39th floor (40,000 sq. ft.); Moved in June 2006

· Darby & Darby P.C.: 41st- 42nd floors (80,000 sq. ft.); Move-in projected by May 2007

· DRW Commodities: 34th floor (8,568 sq. ft.); Move-in projected by August 2007

· Mansueto Ventures: 29th floor (40,000 sq. ft.); Moved in April 2007

· Moody's Corporation: 11th - 28th floors (670,000 sq. ft.); Move-in projected for June - October 2007

· New York Academy of Sciences: 40th floor (40,000 sq. ft.); Moved in September 2006

· Silverstein Properties: 38th floor (40,000 sq. ft.); Moved in May 2006

· World Trade Center Design Task Force / Pre-built office space: 11th floor (40,000 sq. ft.); Moved in December 2006

Currently headquartered at 99 Church Street in Manhattan, Moody's is an essential component of the global capital markets. It provides credit ratings, research, tools and analysis to help protect the integrity of credit. Moody's Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities; Moody's KMV, a provider of quantitative credit analysis tools; Moody's Economy.com, which provides economic research and data services, and Moody's Wall Street Analytics, a provider of software tools and analysis for the structured finance industry. The corporation, which reported revenue of $2.0 billion in 2006, employs approximately 3,400 people worldwide and maintains a presence in 27 countries.

Roger A. Silverstein of Silverstein Properties, Stephen B. Siegel, chairman of global brokerage at CB Richard Ellis and Simon Wasserberger of CB Richard Ellis handled the negotiation of the lease agreement for Silverstein. Cushman & Wakefield Vice Chairman John Cefaly and Executive Vice President Gus Field represented Moody's in lease negotiations.

7 World Trade Center, which contains 42 office floors above a ten-story base, is New York City's first high-rise office building to be certified as "green" pursuant to the U.S. Green Building Council's Leadership in Energy & Environmental Design (LEED) rating system. The building's environmental design features include state-of-the-art ultra-clear exterior glass technology, high-efficiency air filtration, energy and water conservation technologies and 15,000 square feet of open park space to provide a pleasing urban environment for tenants, neighbors and building visitors.

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About Silverstein Properties

Silverstein Properties is a Manhattan-based real estate development and investment firm that has developed, owned and managed more than twenty million square feet of office, residential and retail space. In July 2001, Silverstein completed the largest real estate transaction in New York history by acquiring the 10 million sq. ft. World Trade Center, only to see it destroyed by terrorist attacks six weeks later on September 11, 2001.

Silverstein has committed to the redevelopment of the World Trade Center site. On May 23, 2006, Silverstein Properties opened 7 World Trade Center, a 52-story, 1.7 million square foot office tower, at 250 Greenwich Street, just north of the World Trade Center site. In April, 2006, Silverstein Properties started work on the Freedom Tower. In September, 2006, designs were unveiled for three new office towers on the WTC site - 200, 175 and 150 Greenwich Street - that will be developed by Silverstein Properties. Construction on the three towers will begin in January 2008. For more information, visit www.wtc.com.