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« HOME EQUITY NIGHTMARE: Second Liens, Second Wave Of Losses For Big Banks | Main | CHART: Ten Years, Ten Increases In The Debt Ceiling »

NOT SO FAST: Moody's Warns That McConnell's Debt Ceiling Back-Up Plan Will NOT Save U.S. AAA Rating

Moody's put the kibosh on the McConnell Senate compromise this morning.  Still no comment from S&P who warned last week that a downgrade could come within 90 days.



A backup plan to raise the U.S. debt ceiling and avoid default could still lead to a negative outlook on the country's ratings, Moody's said, highlighting the plan's failure to substantially reduce the deficit.

The back-up plan offered by Senator Mitch McConnell would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody's analyst Steven Hess told Reuters in an interview, bringing relief to investors who fear an imminent downgrade of the coveted U.S. triple-A rating.

"But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don't seem to be very large," Hess said. "Therefore, this plan might result in a negative outlook on the rating."

McConnell's plan, which is being negotiated with Senate Majority Leader Harry Reid, would include about $1.5 trillion in deficit-reduction measures.

Hess said a "much larger amount" of deficit-reduction measures would be necessary for Moody's to affirm U.S. ratings with a stable outlook.

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Reader Comments (4)

Of course our debt will be downgraded; credit has run out; we are printing up the money we borrow. This is hyperinflationary which will completely destroy the dollar. The interest we pay on the debt will at least triple. As our depression continues revenues will FALL. Failing to balance our budget NOW or preferably ten years ago leads to ruin.

Folks this country is DELIBERATELY self destructing.

Jul 20, 2011 at 10:18 PM | Unregistered CommenterLou
lou...it's the only way bernanke knows how to combat deflation...that's the simple answer...
Jul 21, 2011 at 1:34 AM | Registered CommenterDailyBail
Third World paradise here we come...
Jul 21, 2011 at 4:05 AM | Unregistered CommenterS. Gompers
That's what the one world government wants! For US and world to go bankrupt, you think this is just by accident, nope!
Jul 21, 2011 at 2:19 PM | Unregistered CommenterWho

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