Fitch Ratings Inc. cautioned today (Wednesday) that it may downgrade the U.S. credit rating - currently AAA, the highest ranking - if Congress doesn't reach a fiscal cliff deal.
The ratings agency said if negotiations on both the fiscal cliff and the debt ceiling extend into 2013, Fitch will review the credit rating which may lead "to a negative rating action."
"Failure to avoid the fiscal cliff...would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the U.S. into an avoidable and unnecessary recession," Fitch wrote in its 2013 global outlook. "That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the U.S. would lose its AAA status."
Fitch's warning is not merely a threat, and it isn't the only rating downgrade facing the United States.
Moody's Corp. (NYSE: MCO), which also currently has a AAA rating in place and maintains a negative outlook, advised in September that it was prepared to strip the country of its stellar rating if lawmakers don't come up with a long-term debt reduction plan.
Standard & Poor's has been even less lenient.
It trimmed its U.S. credit rating one notch in 2011 to AA+, alluding to the political stalemates that thwarted an agreement on raising the debt ceiling. The downgrade, a first in U.S. history, was harshly criticized, and stunned Washington.
S&P lectured earlier this year that an additional downgrade was likely sans a debt deal.
Joining S&P in stripping the U.S. of its desirable credit rating was Egan Jones, a much smaller but still well-known rival among the big three credit rating agencies. This September, it slashed its rating to AA- from AA.
A U.S. credit rating downgrade is just one important consideration in the debt ceiling debate.
U.S. credit downgrade
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Is a U.S. Credit Rating Downgrade a Sure Thing?
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Investing Icons Weigh In On U.S. Credit Downgrade
The market's verdict on the Standard & Poor's (S&P) U.S. credit downgrade is in - and it isn't good.
In direct response to the U.S. credit downgrade, the Dow Jones Industrial Average plunged more than 631 points, or 5.52%, yesterday (Monday), after falling 6% last week.
No question, we're in the midst of a free-fall. And there's no doubt about the role Washington played in creating this dangerous situation. But U.S. policymakers aren't the only ones to blame.
Some of Wall Street's heaviest hitters, including Warren Buffett and Bill Miller, have zeroed in on S&P for perhaps being a little too overzealous in its approach.
"I don't get it. It doesn't make sense. In Omaha, the U.S. is still triple-A rated," Buffett told Fox Business Network. "And if there were a quadruple-A, I'd give it to the U.S."
Buffett and fellow S&P critics said the agency made a hasty move that scared investors and clobbered markets.
"If anything, it may change my opinion on S&P," Buffett said.
Echoing Buffett's disbelief was Legg Mason Inc.'s (NYSE: LM) Chief Investment Officer Bill Miller.
Miller said S&P "rushed to judgment" and took a "precipitous, wrong and dangerous" action.
In direct response to the U.S. credit downgrade, the Dow Jones Industrial Average plunged more than 631 points, or 5.52%, yesterday (Monday), after falling 6% last week.
No question, we're in the midst of a free-fall. And there's no doubt about the role Washington played in creating this dangerous situation. But U.S. policymakers aren't the only ones to blame.
Some of Wall Street's heaviest hitters, including Warren Buffett and Bill Miller, have zeroed in on S&P for perhaps being a little too overzealous in its approach.
"I don't get it. It doesn't make sense. In Omaha, the U.S. is still triple-A rated," Buffett told Fox Business Network. "And if there were a quadruple-A, I'd give it to the U.S."
Buffett and fellow S&P critics said the agency made a hasty move that scared investors and clobbered markets.
Buffett: "I Don't Get It"
Buffett said the U.S. debt downgrade would not deter him from investing in U.S. Treasuries."If anything, it may change my opinion on S&P," Buffett said.
Echoing Buffett's disbelief was Legg Mason Inc.'s (NYSE: LM) Chief Investment Officer Bill Miller.
Miller said S&P "rushed to judgment" and took a "precipitous, wrong and dangerous" action.
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