Moody's Investors Service has put the U.S. government's bond rating on watch for possible downgrade. Moody's currently rates the U.S. at Aaa, its highest rating. Moody's cited the rising possibility that the statutory debt limit will not be raised on a timely basis.
If the U.S. doesn't raise the debt limit in a timely basis, with an early August deadline, it would lead to a default on U.S. Treasury debt obligations.
Moody's also said Wednesday it has placed on review for possible downgrades its ratings on financial institutions linked directly to the U.S. government, including Fannie Mae and Freddie Mac.
Political leaders have been meeting in Washington in bipartisan meetings to try and agree to raise the U.S. debt ceiling by August 2, the deadline. Over the weekend it appeared agreement was close, but in recent days talks have stalled, and neither Republicans or Democrats seem optimistic agreement will be reached in time.
Earlier this week President Barack Obama warned that social security checks may not go out on time if agreement is not reached.
Should legislative leaders reach compromise, raising the debt ceiling in time for America to expand beyond its current limit of $14 trillion then Moody's is expected to confirm its current Aaa rating on the U.S. government's bonds.