Moody's warns it may downgrade US credit rating

WASHINGTON (AP) -- Moody's Investors Service on Wednesday threatened to lower the United States' credit rating, saying there is a small but rising risk that the government will default on its debt.

The credit rating agency said it will review the federal government's triple-A bond rating because the White House and Congress are running out of time to raise the nation's $14.3 trillion borrowing limit and avoid a default.

The government reached its borrowing limit in May. Treasury says the government will default on its debt if the limit is not raised by Aug. 2.

A downgrade would raise interest rates on U.S. treasury bonds, increasing the interest paid by U.S. taxpayers. It would also push up rates for mortgages, car loans and other debts, which are linked to Treasury rates.

Moody's had warned in June that it would take this step if President Barack Obama and Republican lawmakers failed to make progress on an agreement by mid-July. The other credit ratings agencies, Standard & Poor's and Fitch, have said they may make similar moves.

Some Republican lawmakers have expressed skepticism that failing to raise the limit would have a major impact.

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