Thursday, July 14, 2011

S&P warns that chance of downgrading U.S. credit rating is 50 percent

Standard & Poor’s said late Thursday that it could downgrade the U.S. credit rating as soon as this month, and there is a 50 percent chance it will do so within three months, if Washington fails to come to an agreement over the nation’s debt.

In a statement, S&P indicated a “substantial likelihood” of downgrading the U.S. credit rating, citing a stalemate in Washington over raising the federal limit on borrowing.

S&P managing director John Chambers said in an interview that the downgrade could come by the end of the month if Congress has not voted to raise the $14.3 trillion debt ceiling.

“The positions of the administration and the Republican leadership are still very far apart,” Chambers said. “The tone of the debate has made us wonder whether a compromise can be achieved.”

All three major credit rating agencies have now threatened the United States’ coveted status as the world’s most secure economy. Its AAA rating identifies U.S. Treasury bonds as one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates.
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