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TheStreet Open House

Fitch: U.S. Risks Downgrade of AAA Rating

NEW YORK ( TheStreet) -- Fitch Ratings said Wednesday the U.S. probably wouldn't be able to preserve its "AAA" sovereign ratings status if it didn't make "full and timely" payments on its debt.

The ratings agency said it was confident that the U.S. would raise its debt ceiling and make payments on the debt, but that "such a 'tail risk' for the world's most important fixed-income issuer warrants comment as well as clarity from Fitch for users of its ratings ..."

Disputes between Republicans and Democrats have hampered measures to raise the debt ceiling. The U.S. reached the debt limit of $14.3 billion last month.

Fitch issued a similar watch statement in 1995 when it considered a default on Treasury interest payments as possible, but dropped it after Congress and former President Bill Clinton agreed to raise the maximum amount that could be borrowed.

Fitch said it would downgrade the U.S. to "restricted default" if it did not honor its debt obligations by Aug. 15.

Moody's warned last week it might consider cutting the U.S.'s credit rating if there wasn't a deal to raise the debt ceiling.

-- Written by Joe Deaux in New York.



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