S&P says 50-50 chance of U.S. downgrade

Reuters/Yahoo ^ | 7/21/11

[markomalley]

Standard & Poor's reiterated on Thursday it sees a real risk that future U.S. government deficits may meaningfully miss discussed targets and that there is a 50-50 chance the U.S. AAA credit rating could be cut within three months, perhaps as soon as August.

The deficit reduction debate is coming up against an August 2 deadline when the $14.3 trillion limit on America's borrowing capacity is exhausted, putting in jeopardy payments on U.S. Treasury debt as well as paychecks for federal employees and soldiers.

If an agreement is reached to raise the debt ceiling but nothing meaningful is done in terms of deficit reduction, the U.S. would likely have its rating cut to the AA category, S&P said.

"While banks and broker-dealers wouldn't likely suffer any immediate ratings downgrades, we would downgrade the debt of Fannie Mae, Freddie Mac, the 'AAA' rated Federal Home Loan Banks, and the 'AAA' rated Federal Farm Credit System Banks to correspond with the U.S. sovereign rating," S&P said in its report.

"We would also lower the ratings on 'AAA' rated U.S. insurance groups, as per our criteria that correlates insurers' and sovereigns' ratings," the firm said.

[rockrr]

Boy that would really suck for the Congress - all that hard work selling out the American people and then still be downgraded

/s

[kabar]

If an agreement is reached to raise the debt ceiling but nothing meaningful is done in terms of deficit reduction, the U.S. would likely have its rating cut to the AA category, S&P said.

[Retired Greyhound]

While I agree here, these rating agencies are generally full of crap.

Totally missed the mortgage collapse.

[Justa]

The markets have already downgraded it.

S&P is merely trying to protect its image -which is just about worthless.

Redemption is a long way off considering the notorious role the rating agencies played in the MBS scandal. They enabled it! Vouching for trillions of bad mortgages backed by sloppy paperwork isn’t the hallmark of integrity or competance.

[upchuck]

Pardon me for being real, but isn't there always a 50/50 chance for a downgrade. It would be news if S&P said there was a 55/45 chance.

[ckilmer]

[ckilmer]