Credit Rater Fitch Puts U.S. On ‘Negative Credit Watch’
Credit rating agency Fitch just sent a pretty strong signal to Washington, D.C.:
Late Tuesday afternoon, Fitch credit rating service announced that it put the U.S. on credit rating watch negative because of government failure to raise the debt ceiling in a “timely” manner. The ratings service affirmed the U.S. credit rating at AAA — a rating that it retained in the face of the debt ceiling debate in 2011 — but the announcement puts the U.S. credit rating at risk for a downgrade.
“The U.S. authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures,” the ratings service said in a statement. “The U.S. Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just USD30bn. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default.”
This brinksmanship also “have some detrimental effect on the U.S. economy,” Fitch said.
The last time there was a debate over the debt ceiling, in July of 2011, Standard & Poor’s downgraded the U.S. credit rating for the first time in its history, taking it from a AAA to an AA+ and throwing the markets in turmoil. At that time, Moody’s and Fitch retained a rating of AAA. Earlier in October, Moody’s said that the current debt ceiling debate is less dire than that of 2011 and said that the U.S. creditworthiness would not be at risk this time around. Fitch, however, clearly disagrees.
“The prolonged negotiations over raising the debt ceiling (following the episode in August 2011) risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.,” Fitch said on Tuesday. “This “faith” is a key reason why the U.S. ‘AAA’ rating can tolerate a substantially higher level of public debt than other ‘AAA’ sovereigns.”
Translation: Congress, get moving already.
Note: The link and excerpt in this post have been changed from the original, which inadvertently was a post from two weeks ago.
Um…the story is from 16 days ago? What do you mean it is just breaking?
Xerxes,
My mistake. I’ve updated with information from today.
@Xerxes: @Doug Mataconis: How so? It looks like the Fitch statement is dated today. BTW I wonder if the are also downgrading everyone on Social Security and Hospitals and Doctors that depend on Medicare payments.
I expect we’re not going to see any real movement on the debt limit until the stock market crashes 4000 points.
Buckle your seats, boys, we’re in for a bumpy ride.
Well there you go, it’s just about official now, so close that we might as well acknowledge it – Republicans are recidivists. They forced a downgrade in 2011, and their actions are the cause of a negative-credit-watch now. They’re well on their way to causing another downgrade.
@al-Ameda:
Totally agree with your sentiment. If Fitch has to state it, it’s already too late. The proof is in the pudding with this republican party. They sold their souls to the devil to ride the Tea Party wave in 2010 and now it is time to pay! Anyone who continues to vote republican in 2014 is insane.