Moody's may review US if no progress on debt
RATINGS agency Moody's said that if there is no progress on increasing the statutory debt limit, it expects to place the US government's Aaa credit rating under review for a possible downgrade.
"The heightened polarisation over the debt limit has increased the odds of a short-lived default," New York-based Moody's said in a statement. "If this situation remains unchanged in coming weeks, Moody's will place the rating under review."
A bill that would raise the US debt limit by $2.4 trillion failed to win House passage on Tuesday in a vote Democrats said was rigged to ensure its defeat.
In April, Standard & Poor's put the US government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.
"Obviously the debt limit has to be raised or it's going to bring a severe blow to the US economy," said Jason Rogan, director of US government trading at Guggenheim Partners, a New York-based brokerage for institutional investors.
"They're pretty much restating what everyone on Wall Street is well aware of."
Republicans who control the House of Representatives announced the vote last week as a way to demonstrate that lawmakers don't support extending the $14.3 trillion debt limit unless agreement is reached with President Barack Obama's administration on significant spending cuts.
Treasury Secretary Timothy Geithner has warned that a failure to raise the debt ceiling by August 2, the date he now projects borrowing authority would be exhausted, may have catastrophic effects on the US economy by sharply raising borrowing costs.