Despite Standard and Poor Credit Rating Agency knocking down the United States Credit rating down a notch from their previous AAA rating to a AA+ rating, rival credit rating agency,Moody’s Investor Services, has maintained the United States AAA rating.
Steven Hess, a Moody’s Investor Service analyst responding to Moody’s latest analysis and decision to maintain the United States of America’s AAA rating, expressed caution for the United States. The $2.1 trillion cut to the the United States Federal deficit was a good first start to improve the country’s credit situation, however the U.S. Debt Deal is not enough alone to provide stability to the United State’s outlook.
The United States of America was placed on review on July 13th has U.S. Debt Deal talks stalled, but in the end upon the passage of the Budget Control Act the AAA rating was maintained by Moody’s Investor Services.
It will take more work to the US economy to maintain the current AAA rating by Moody’s and prevent a further credit rating deduction by S&P, which has given the United States a one in three chance to decrease further. Most of the cuts in the Budget Control Act come from the slowing growth of annually approved discretionary programs. This alone without an improvement in the economy or further plans from either the next elected administration or more fiscal actions, the United States will stay on review for a negative outlook.
In addition to the downgrade on the United States government, institutions with connections to the downgraded government have also faced a lowered status. Fannie Mae and Freddie Mac were reduced to AA+ from triple-A, with their reliance on the government as the primary reason behind this decision.
Fannie Mae and Freddie Mac were not the only institutions to be docked a notch in credit ratings, ten out of the twelve federal home loan banks were cut to an AA-plus rating. The Depository Trust Company, Options Clearing Corporation, Fixed Income Clearing Corporation and National Securities Clearing Corporation were also reduced further down to a AA-plus rating.
With all these downgrades at hand, it is no wonder that more downgraded warnings have been issued. The US government and its financial institutions have already taken a hit, leaving just the states left. On watch will be several large states that have budgetary or fiscal issues that may prohibit their ability to pay its debts. Some insurers within states have already been downgraded.
Also around the world, France and Great Britain are under scrutiny and may face a downgrade.