Fitch: Crisis May Damage U.S. Credit Rating

In an inevitable reaction to the continued debt ceiling group grope — and with no resolution in sight — the Fitch agency has warned that it could downgrade various elements of the U.S. credit rating.

And it gets worse. Even if the current debt imbroglio is brought to a last-nanosecond conclusion, the agency is not likely to forget this episode… and will have its hand on the rating trigger if lawmakers don’t put measures in place to avoid debt-related cliffhangers in the future.

From Fitch’s press release:

Failure by the government to honour interest and/or principal payments on the due date of U.S. Treasury securities would lead Fitch to downgrade the U.S. sovereign IDR to ‘Restricted Default’ (RD) until the default event was cured. We would also downgrade the rating of the affected issue(s) to ‘B+’ from ‘AAA’, the highest rating for securities in default in expectation of full or near-full recovery. Debt securities approaching maturity or those with approaching coupon payments would be vulnerable to a downgrade. The Country Ceiling would likely remain ‘AAA’.

In the event of a deal to raise the debt ceiling and to resolve the government shutdown, which Fitch expects, the outcome of a subsequent review of the ratings would take into account the manner and duration of the agreement and the perceived risk of a similar episode occurring in the future.

It can’t get clearer than that. Credit rating folks don’t especially like high drama — especially after all the face-egg they received during the financial meltdown half a decade ago. So now they’re not kidding around.

Unlike House Republicans, who, on the evidence, think this is all a big hootenanny.

By: rhb

Rob is a NYC-based Internet entrepreneur. He's also a businessman and job creator (wait: doesn't demand create jobs?) who understands the sense, and the eventual predominance, of the progressive agenda.