Fitch credit rating agency says US under review for credit downgrade

Fitch Ratings, one of the big three credit rating agencies, issued a warning today about the “prolonged negotiations over raising the debt ceiling,” which is a precursor to downgrading the US credit rating.

Republicans are gleefully preparing to force the nation to default on its debt, the effect of which, most observers outside of the Republican Congress agree, would be “catastrophic” to the US and world economy.

From Fitch:

Fitch Ratings has placed the United States of America’s (U.S.) ‘AAA’ Long-term foreign and local currency Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). The ratings of all outstanding U.S. sovereign debt securities have also been placed on RWN, as has the U.S. Short-term foreign currency rating of ‘F1+’. The Outlook on the Long-term ratings was previously Negative. The U.S. Country Ceiling has been affirmed at ‘AAA’.

Fitch added:

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. 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.

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Here’s CNBC’s take:

Alex Rogers has more at TIME:

The move is not a downgrade, or an indictment of broader U.S. economic conditions. Rather, it is a warning issued on the basis of Congressional negotiators’ inability to break the partisan impasse and extend U.S. borrowing authority before the Treasury Department-imposed deadline of Oct. 17.

And even more from Zachargy Goldbarb and Aaron Blake from the Washington Post:

Toward the end of the also-contentious 2011 debt ceiling debate, Standard and Poor’sdowngraded the United States’ long-term credit rating from ‘AAA’ to ‘AA+’. It was the first credit rating downgrade for the U.S. in history, and remains downgraded now.

S&P earlier this year adjusted its outlook on the U.S. credit rating from “negative” to “stable,” but the credit rating remains at “AA+.”

Moody’s threatened to downgrade the U.S. credit rating in 2011, though it never did. It also issued an early threat in 2012 for this year’s budget negotiations.

Fitch, S&P and Moody’s are considered the three top credit rating agencies.

Andrea Mitchell at NBC doesn’t think Fitch’s warning is going to be enough:

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Follow me on Twitter: @aravosis | @americablog | @americabloggay | Facebook | Instagram | Google+ | LinkedIn. John Aravosis is the Executive Editor of AMERICAblog, which he founded in 2004. He has a joint law degree (JD) and masters in Foreign Service from Georgetown; and has worked in the US Senate, World Bank, Children's Defense Fund, the United Nations Development Programme, and as a stringer for the Economist. He is a frequent TV pundit, having appeared on the O'Reilly Factor, Hardball, World News Tonight, Nightline, AM Joy & Reliable Sources, among others. John lives in Washington, DC. .

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8 Responses to “Fitch credit rating agency says US under review for credit downgrade”

  1. BeccaM says:

    Yeah. And I don’t see how Obama can just stand by and keep saying his hands are tied.

  2. FLL says:

    The wild card is Obama, who could break a law or two concerning the Treasury and the Federal Reserve in an effort to uphold the 14th Amendment. He did take an oath to uphold the Constitution, after all. Most opinion holds that the 14th Amendment trumps The Second Liberty Bond Act of 1917 and The Federal Reserve Act.

  3. FLL says:

    You bring up a good point about the recent polls. The poll question simply asks whether you’re satisfied with the Republicans and Democrats. It may very well be the case, as you suggest, that people who say they’re dissatisfied with the Democrats are saying so because they think the Democrats are not giving the Republicans enough of a fight… which still means that many of the same people who say they are dissatisfied with the Democrats will vote for them rather than the Republican crazies.

  4. MyrddinWilt says:

    I think it is even more cynical than that. They understand that the scheme is going nowhere. But they want someone else in the caucus to blink for them.

    Meanwhile the country looks on and the folk who are not tea party die hards think worse and worse of the whole Republican party.

    I don’t believe the results for the Democrats mean quite the same. Plenty of folk are upset with them for not dealing with the crazies more successfully. But that does not mean that those folk upset with them are going to vote for the crazies.

  5. BeccaM says:

    Here’s the disconnect: The rest of the world sees what the Republicans are doing and concludes the party is playing with napalm. Irresponsible, crazy, boderline (or not even borderline) seditious.

    The Republican radicals think all they have to do is stand firm and, despite being a majority of only one party in one half of our country’s legislature, they’ll get everything they want — because the other guys (the Dems) will take responsibility to be sane.

    House Republicans did this on purpose. They set this all up to happen this way, because they assume — whether correctly or not — that the rest of the government will surrender unconditionally to the GOP demands. Hence the House rules changes. Hence the refusal to attend negotiations or to negotiate in good faith. Hence the extremist rhetoric.

    Hence that Christmas list of crazy demands they began putting together last month. Those weren’t fringe wish-list proposals. This was them assuming because they’d wired the whole place with explosives, Mommy and Daddy have no choice but to give in to every demand, large and small, and they figured they might as well put everything on that list right now.

  6. brian says:

    Where is OBAMA?? On WABC Talking about phones.

    Obama: Coolest thing about being president is everyone takes your phone calls

    Let’s go over the next cliff… Then Government will be forced to live within it’s means like everyone else.. They take in 260 billion a month (TAX) a month, then work with that!! 2.4 trillion a year is enough! Big deal!

  7. usagi says:

    As digby keeps pointing out, we’re not dealing with people who share the same set of assumptions as the reality-based community. This is an intended outcome of what they’re doing.

  8. Naja pallida says:

    The last time we came to this point with a debt ceiling fight, interest rates were hiked by half a percent. May not sound like much, but it cost the tax payers billions. Party of fiscal responsibility, my ass.

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