Much of the backlash to Standard & Poor's controversial downgrade of Treasury debt has been driven by media leaks and public denunciations, which have combined to create a portrait of company with an opaque process, subpar analytical ability and dubious motives.

This may or may not be fair, but its the political world into which S&P has careened headlong. Someone might be tempted to make jokes about a naïve company showing up for a knife fight with a fingernail file. This political backlash cannot be taken lightly, but neither can the budding backlash that threatens to hurt the McGraw-Hill subsidiary financially. The Financial Times reports that three municipalities have terminated their relationships with S&P. Los Angeles; Manatee County, Florida; and San Mateo County, California, made the decisions after their investment funds were downgraded by S&P a notch.

The rationale for the downgrades was that they were too heavily exposed to Treasury bonds. It does not appear that the funds have suffered financially. In fact, they have soared as the value of Treasury has soared.

"The move is a tangible sign that S&P's business is suffering from a patriotic backlash in the United States following its decision to strip the world's biggest economy of its triple A credit rating."

The issue is whether other customers will follow suit. We may see more investment funds of this ilk severe ties, as ratings were basically voluntary. Whether others with a more formal rating requirement will switch to Moody's or Fitch remains an open question.

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