Fitch warning stokes new debt ceiling concerns
Oct. 16, 2013 – Fitch Ratings, noting the possibility that the federal government will not be able to resolve its debt limit problem in time to avoid default, warned Tuesday that it was placing the United States’ AAA credit rating on “rating watch negative.”
The change means Fitch sees a growing probability that the rating will be downgraded, though that might not happen for several months. “Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default,” the company said in a statement.
NAFCU has written lawmakers two times in as many weeks – one of those times also writing the White House – warning of the potential for widespread disruption in financial markets if a deal on the federal debt limit isn’t in place in time to avert a default.
“This is just the kind of thing we need to prevent,” Dan Berger, NAFCU’s president and CEO, said Tuesday. “We cannot stress enough how important this issue is to the continued growth and recovery of the nation’s economy and to the stability of all financial institutions, including credit unions and their 96 million consumer-members.”
Treasury Secretary Jack Lew, testifying last week before the Senate Finance Committee, recalled a study on the debt limit showdown in 2011 and the potential risks of waiting until the last moment to raise the debt ceiling in the current economic environment. He noted the potential for “markedly elevated” interest rates in the U.S., negative impact on global markets and “real risk of a financial crisis and recession that could echo the events of 2008 or worse.”