Official: U.S. Credit Rating Could Downgrade Further

Posted August 7th, 2011 at 1:55 pm (UTC-5)
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The managing director of Standard and Poor's credit rating agency says there is a one in three chance that the U.S. credit rating will downgrade further over the next six months to two years.

John Chambers said on U.S. television Sunday that the credit rating, which the agency downgraded from triple-A to double-A-plus on Friday, will likely not improve until the national debt stabilizes and Washington is more able to reach consensus.

On another U.S. talk show , former White House adviser David Axelrod blamed the downgrade on the Tea Party movement. He said the fault lies with lawmakers who were “willing to see the country default” rather than strike a deal on the debt ceiling.

Former Federal Reserve Chairman Alan Greenspan said he expects the U.S. stock market to react negatively to the downgrade when it opens Monday. But he added that he sees no risk in investing in U.S. Treasury bonds.

On Saturday, the U.S. Treasury Department criticized S&P's decision, calling the rating agency's judgment “flawed.” It cited a $2 trillion error in its calculation of U.S. deficits over the next decade. S&P acknowledged the error, but upheld its decision.

S&P officials defended their decision to drop the credit rating, blaming Congress for months of political haggling over a deficit reduction deal that they say does not go far enough. The deal calls for reducing the deficit by more than $2 trillion over 10 years. S&P had called for $4 trillion in savings.

The other two major credit rating agencies, Moody's and Fitch, have so far maintained the U.S. triple-A rating. The S&P move raises questions about the impact on investors, who have long seen U.S. debt, in the form of bonds or treasuries, as one of the safest investments in the world.

This is the first time since 1917 that U.S. debt has lost its top-tier rating.

A White House statement issued Saturday called on elected leaders to “do better” following the downgrade, calling on lawmakers to put their partisan differences aside in order to strengthen the U.S. economy.

Mr. Obama and Congress reached a deal hours before the deadline last Tuesday to increase the nation's $14.3 trillion borrowing limit and avoid an unprecedented default on the government's financial obligations.