Reid’s Downgrade Remark Foreshadows Fitch Warning

Senate Majority Leader Harry Reid said on the floor a bit after 11:30 a.m. Tuesday that rating agencies are talking about downgrading U.S. debt "as soon as tonight."

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Jonathan Ernst / Reuters

Senate Majority Leader Harry Reid (D-NV) returns to the Senate floor, declining to speak with reporters after a Senate Democratic caucus luncheon at the U.S. Capitol in Washington, October 15, 2013.

Updated, 5:20 p.m.

Senate Majority Leader Harry Reid said on the floor a bit after 11:30 a.m. Tuesday that rating agencies are talking about downgrading U.S. debt “as soon as tonight.”

The remark likely did not arise from inside knowledge about the plans of ratings agencies, a Reid adviser says. “To my knowledge, he has not been briefed,” said Adam Jentleson, Reid’s spokesman.

But after markets closed Tuesday evening, Fitch Ratings placed the U.S. credit rating under review for a downgrade, citing risks stemming from the looming debt crisis.  “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 agency wrote.

The move is not a downgrade, or an indictment of broader U.S. economic conditions. Rather, it is a warning issued on the basis of Congressional negotiators’ inability to break the partisan impasse and extend U.S. borrowing authority before the Treasury Department-imposed deadline of Oct. 17.  “The announcement reflects the urgency with which Congress should act to remove the threat of default hanging over the economy,” a Treasury Department spokesperson said.

Just hours ago, Reid’s remarks looked like an attempt to motivate House Republicans to move quickly on their proposal to avert default and open the government, which has stalled since its leadership outlined the plan to the party conference Tuesday morning. An aide to Minority Leader Mitch McConnell (R-Ky.) said that McConnell had also not been briefed on the topic of ratings company plans.

Fitch is not the first agency to warn investors about the dangers of budget brinkmanship. Standard and Poor’s downgraded the long-term sovereign credit rating of the U.S. to ‘AA+’ from ‘AAA’ in 2011, citing “political brinksmanship,” but it is seen as unlikely that Standard and Poor’s will downgrade the country again. “This level of brinksmanship is already factored into our AA+ rating,” says John Piecuch, a S&P Director of Communications. “S&P continues to believe that there will be a resolution of the debt ceiling issue, even if at the 11th hour.”

“While it is not our expectation, if there were a missed payment, that would be a trigger for a rating change to SD [Selective Default],” Piecuch added. Standard & Poor’s lowered Cyprus’ credit rating to “Selective Default” this summer after the government announced a voluntary debt exchange of sovereign bonds.

The financial markets showed some signs of distress Tuesday as the country nears the default deadline on Thursday. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all fell slightly in Tuesday’s afternoon trading after a four-day rally.

With reporting by Zeke J. Miller and Alex Altman

18 comments
j45ashton
j45ashton

Well, the far right underestimated the president again.  As usual, when the Democrats get tough, the moderate Republicans start whining & the far right starts encouraging violence.  That's the big division within the GOP.  

Game, set, match.

Except the fat lady hasn't sung yet.  Ted Cruz & Mike Lee (aka Ted Cruz Jr) could filibuster.  And it is still possible that a vote in the House could fail if enough cowardly GOP moderates decide to hide and either abstain or vote with the far right thinking that enough 'other 'GOP moderates will vote with the democrats.


drudown
drudown

The democrats must speak up publicly that the GOP is deceptively omitting any reference to the FACT the Congress’ “crisis” is by its own hand. What, voting 42 times on “defunding” Obamacare doesn’t just exemplify the “paid for” Tea Party’s self-perceived ability to “will their republican minds” around applicable law? Only to, as the evidence proves, try to use an Unconstitutional Legislative Veto? These “concessions” would be- let me guess- “still available”? if the Speaker and Congress hadn’t deliberately FAILED to do their job to pass a commercially reasonable Budget as required by statute? It is just a base form of Tyranny, really.

“In order to know that a jar is jar, I open my eyes and see.” – Shankara

Not so, says the “paid for” GOP?

Just this: if this purportedly "magical" Debt Ceiling Act is some "krytopnite" (sic.) that (oh no!) just, well, prevents the GOP Congress from doing its job in the first instance...what rational voter would let them lawfully retain a Legislative Veto power henceforth, i.e., It is UNLAWFUL in the first instance or void ab initio.

Yet this is why the operative facts require remedial action by the State.

Why shouldn’t the Speaker be “forced” into pleading the 5th by virtue of “forcing” furloughs and economic injury on the People? Why shouldn’t all complicit parties be made to testify to simply re-establish that it is UNLAWFUL for one branch of the three to (1) refuse to do express duties under the Constitution and (2) take the present GOP position of  "gee, let's wait and see what happens" [read: as INJURY is presently unfolding]; much less (3) after the GOP Congress deliberately and pre-meditatively placed procedural hurdles (i.e., more evidence of Scienter and conspiracy to subvert Constitution and Due Process to the People) to prevent the very cure for the "shut down" which, in reality, was done to purport to give the Speaker some imaginary sword that Foreign Rulers can cut and cut away against the rule of law that precludes such Treason. 

I challenge ANY member of the bar, in ANY of the Several States, to cite the Supreme Court case that purports to justify the Congress from passing a Budget when the foreseeability of harm to the State is manifest and manifestly avoidable. If the Speaker has reservations about the Nation's spending habits, maybe he should interrupt Rand Paul proposing Treasonous notions of the Executive branch or Armed Services killing citizens in SF cafes or Ted Cruz implying our Bill of Rights is not the Supreme Law of the Land…and try to pass a Budget.

This is not a "reasonable disagreement over abstract legal policy, etc."

This is turning Stare Decisis on its head and pretending our ability to police our own elected officials is somehow hindered or dead.

"Thy love afar is spite at home." - Emerson

drudown
drudown

At some point, if the democratic leaders in Congress cannot force a vote via whatever means necessary before the "default" the GOP members are obviously preferring to choose...at what point are they too responsible?

I have yet to hear a SINGLE politician complain that the "extortion" is UNLAWFUL, much less a self-evident "Legislative Veto". Has the whole Congress been paid off by Foreign money to see the United States suffer?

Mr. President, you need to do something. Not later. Now- to prevent the foreseeable INJURY any "default" will cause the People. 

"After the event, even the fool is wise." - Viscount Symonds

MrObvious
MrObvious

This is not a question of 'I believe'.

This is a question of economy certainty. If we continue to let the nutbalz in the GOP house to run the show it will lead to a severe economic downturn.

jmac
jmac

Since we were downgraded before and Republicans didn't take the heat for the downgrade why should they think this time will be any different?    How many Americans even know that we were downgraded and how much it cost us?     Palin can add being downgraded to the reasons to impeach Obama.

I just heard a Republican Congressman  say that he was elected to do away with Obamacare and big government and he has a duty to his constituents first and foremost (apparently with no matter to the consequences to the nation).    

ARTRaveler
ARTRaveler

If the Republicans don't like the national debt now, the increase in the cost of bonds will be the gift their stupid attitude gives the country.  House mortgage rates are already going up.  What else do you Tea Party brains want to do to screw the American people?? Maybe you need to find out how many followers are on Social Security and don't care if you cause the November 1st payments to be delayed for an unknown time while their doctor's appointments are delayed until Medicare is paying the bills again.  It is nice to have an opinion on everything but this is money in their pocket and there are too many already living very close to the line.

ThereseSisi
ThereseSisi

Harry Reid an old man who spent his life involved with the mafia who has become rich with his sons at their law firm off child abuse race crimes cases in Las Vegas. Anything he does is only for self greed and power even if it is over very sick children.

drudown
drudown

@ViableOp 

How about they just pass a Budget according to law instead of breaking it via pre-meditated "shut down"?

Tell me, if Courts can bar a vexatious litigant impeding the pursuit of Substantial Justice under what auspices can the MEMBERS OF CONGRESS ON EITHER SIDE claim or invoke any excusable neglect if the "default" occurs? They should removed for not endorsing a Budget that serves a Constitutional purpose- not precedent for "extorting" Legislative Veto power.

grape_crush
grape_crush

@drudown> ...at what point are they too responsible?

The point where repeated messaging blaming Dems for this fiasco from the right wing begins to sink in to the media narrative.

I mean, if, a few days after he was elected in 2008, the talking heads started saying that Obama 'owned' the recession, then it's no stretch to say that Dems will get blamed for not capitulating to the right wing's hostage demands.

That all being said, yeah, Dems could be even more vocal.

ThereseSisi
ThereseSisi

Lets face it they will shut me down again because I know where all the bones are buried  .I got my waring again.

mantisdragon91
mantisdragon91

@ThereseSisi Speaking of being involved with the Mafia remind us who Sheldon Adelson's casino partner in Macao are? You know the Sheldon Adelson that donate millions to get the GOP the White House in 2012. And the correct answer would be the Triads.

shepherdwong
shepherdwong

@ThereseSisi  Really? That's your excuse for supporting the Republicans who are destroying the country? You people really don't have the good sense god gave you.

barneydidit
barneydidit

@ThereseSisi Right!  We should all look toward the Republicans for the standard by which one's life should be led Sisi...you know...like Darryl Issa who's probably not done much worse than set a few arson fires here and there. 

ThereseSisi
ThereseSisi

@mantisdragon91 @ThereseSisi HARRY REID GAVE MILLIONS TO SHELDON ADELSON IN APPROPRIATIONS taxes TO BUILD HIS Henderson NEVADA HOSPICES. DO YOU THINK SHELDON WAS IN NEED OF THE MONEY? NOW HE OWNS THE BUILDING FREE AND CLEAR ON HIS LAND---AT THE EXPENSE OF AMERICANS. GOOGLE IT UNDER " APPROPRIATIONS SENATOR HARRY REID SHELDON ADELSON HOSPICES HENDERSON NEVADA. "

ThereseSisi
ThereseSisi

@Simkatu @ThereseSisi  Just not Harry Reid I know him from Vegas. He does support child abuse by the way he gives Federal contracts to the RADICAL SECT Mormons who were arrested by the FBI in Vegas married to many under aged girls. This is of records tracking EASY TO LOCATE AS WELL HE GIVES appropriations taxes TO BUILD RELIGIOUS CENTS FOR PRAYING IF YOU ONLY KNEW THE TRUTH...