Congress may be running out of options for heading off a U.S. credit downgrade, and, in a cruel twist, it is effectively at the mercy of the very rating agencies faulted for helping drive the financial crisis.
Absent a sweeping deficit-reduction plan, at least one rating agency says the United States could still be at risk of losing its sterling AAA status even if Congress lifts the debt ceiling by next week. While the same rating firms were widely implicated in the mortgage meltdown that triggered the financial crisis that exacerbated the country's deficits -- leading to a congressional crackdown last year -- analysts say Congress has little leverage with the agencies this time around.
"Ultimately, the ratings agencies are just intermediaries between the problem, which is the debt outlook, and the markets, who are going to have to evaluate that problem," said Douglas Holtz-Eakin, former director of the Congressional Budget Office. "And I don't think that given the scale of the problem there's anything they can do to the ratings agencies to fool (the markets) on this."
Holtz-Eakin said don't expect Congress to play hardball with those firms again just to avert a downgrade.
Why shouldn't the rating of the US be lowered? The US can't handle its finances, so any AAA rating is a farce.
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