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BY VICTORIA CRAIG

The U.S. may be looking at a double downgrade--Standard and Poors dropped the U.S. from AAA to a AA+ in August--
And now--Rumors are circulating about another potential hit.Fox Business has the details.

“The United States’ triple A credit rating could suffer another downgrade before the year is over, according to Bank of America Meryll Lynch. The bank says another major ratings firm could follow Standard and Poors’ downgrade from back in August.”

Fresh off its drop from the top spot just a few months ago, what’s the reason behind another big move so soon? The Cleveland Leader explains...

“The trigger for the ratings drop would likely be a failure by Congress to agree on a credible long-term plan to cut the country's deficit. A second downgrade would come from either Moody's or Fitch...The bipartisan congressional committee, aka the ‘super committee’...must ...strike a deal to reduce the deficit by at least $1.2 trillion by November 23.”

But as one economist for Bank of America Meryll Lynch wrote in a report Friday, he doesn’t have much that deal will happen.

“The ‘not-so-super’ deficit commission is very unlikely to come up with a credible deficit-reduction plan...The committee is more divided than the overall Congress.”

And even if a deal is struck-- will it be enough? Fox Business’ Stuart Varney explains why an agreement by Congress may be too little too late.

“This super committee is supposed to reduce the deficit over a ten year period by $1.2 trillion. The ratings agency says, ‘Wait a minute, 1.2 trillion, that hardly scratches the surface. It’s got to be 3, 4, trillion dollars.’ That super committee does not look like it can tackle taxes and entitlements, which is what’s required to get that deficit down.”

So, what happens if the US rating takes another hit? Los Angeles’ KTTV explains the second downgrade may seem insignificant, but it’s far from meaningless.

“It will have severe ramifications, especially at first, particularly because if the US cannot have a AAA credit rating, kind of who can? And it makes borrowing more expensive for nation and then in turn for the US taxpayer. So there are tons of ramifications out there. But no, it should not be ignored. It’s embarrassing if nothing else -- even if the impact is little in the short term.”

At this point, Moody’s and Fitch still value the US credit as a AAA. But like S&P, Moody’s holds a negative outlook on its US rating.
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Another Credit Downgrade?

October 24, 2011
(2:18)
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Just months after Standard and Poors stripped the US of its AAA credit rating, a second ratings agency is likely to follow suit.
   
Sources:Fox BusinessCleveland LeaderThe LA TimesFox NewsKTTV
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