Moody's Investors Services placed the US credit rating under review for a downgrade, adding more pressure on the U.S. government to raise the debt limit which is $14.3 trillion. Moody's is concerned that the debt threshold wont be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes.
Moody's said in a statement yesterday that the US rating would likely be reduced from Aaa to Aa with no assurance that even if a default is cured quickly, Moody's will return its top rating.
President Barack Obama is considering a meeting with congressional leaders in Camp David this weekend to set a plan to raise the debt limit in the US, as a failure to raise this limit will lead to slower economic growth and another financial crisis.
Moody's also put Aaa ratings of financial institutions directly linked to the government under review for cuts. They include Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and the Federal Farm Credit Banks alongside 7,000 municipal ratings.
Moody's warning follows another similar firm tone from S&P on April 18 that said the U.S. is at risk of losing the triple-A rating unless they reach a plan by 2013 to reduce the deficit and national debt.