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Moody's to review US triple-A debt rating | Moody's to review US triple-A debt rating |
(about 4 hours later) | |
Ratings agency Moody's has said it may cut the US AAA debt rating, citing the "rising possibility" the US could default on its debt obligations. | Ratings agency Moody's has said it may cut the US AAA debt rating, citing the "rising possibility" the US could default on its debt obligations. |
The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant. | The agency warned the likelihood the US would fail to raise its statutory debt limit in time to avert default was low but not insignificant. |
It came as a fifth day of cross-party talks loomed in Washington after a bad-tempered end to Wednesday's meeting. | It came as a fifth day of cross-party talks loomed in Washington after a bad-tempered end to Wednesday's meeting. |
US Fed chief Ben Bernanke has said a default would cause a "major crisis". | US Fed chief Ben Bernanke has said a default would cause a "major crisis". |
Emotions were on the rise on Capitol Hill on Thursday, as Senate Majority Leader Harry Reid, a Democrat, took to the Senate floor to denounce House Republican Leader Eric Cantor. | Emotions were on the rise on Capitol Hill on Thursday, as Senate Majority Leader Harry Reid, a Democrat, took to the Senate floor to denounce House Republican Leader Eric Cantor. |
During talks on Wednesday evening, Mr Cantor reportedly told President Barack Obama that revenue increases simply were not going to happen, and urged him to accept a short-term deal instead of a budget that would carry through to the presidential election in November 2012. | During talks on Wednesday evening, Mr Cantor reportedly told President Barack Obama that revenue increases simply were not going to happen, and urged him to accept a short-term deal instead of a budget that would carry through to the presidential election in November 2012. |
That brought a strong reaction from Mr Obama, who reportedly said: "Enough is enough. ... I'll see you all tomorrow," before leaving the room. | That brought a strong reaction from Mr Obama, who reportedly said: "Enough is enough. ... I'll see you all tomorrow," before leaving the room. |
'Rising default risk' | 'Rising default risk' |
President Obama needs the Republican-led House of Representatives and Democratic-held Senate to sign off a deal to close the US deficit, while allowing Washington to borrow past a 2 August deadline. | President Obama needs the Republican-led House of Representatives and Democratic-held Senate to sign off a deal to close the US deficit, while allowing Washington to borrow past a 2 August deadline. |
He has said he is willing to countenance cuts to social safety-net programmes dear to Democrats, as long as there are tax rises for the rich. | He has said he is willing to countenance cuts to social safety-net programmes dear to Democrats, as long as there are tax rises for the rich. |
Republicans have rejected the latter proposal, saying that would stifle investment and job growth. | Republicans have rejected the latter proposal, saying that would stifle investment and job growth. |
Moody's became the first of the big three ratings agencies - the others being Standard & Poor's and Fitch - to place the US's triple-A rating on review for a possible downgrade. | Moody's became the first of the big three ratings agencies - the others being Standard & Poor's and Fitch - to place the US's triple-A rating on review for a possible downgrade. |
"The review of the US government's bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes," Moody's said. | "The review of the US government's bond rating is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes," Moody's said. |
"As such, there is a small but rising risk of a short-lived default." | "As such, there is a small but rising risk of a short-lived default." |
The US hit its $14.3 trillion (£8.9 trillion) debt ceiling on 16 May, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating. | The US hit its $14.3 trillion (£8.9 trillion) debt ceiling on 16 May, but has since used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating. |
When it came to the crunch in the past, Congress regularly voted to raise the debt ceiling, giving government access to the cash it needed. | When it came to the crunch in the past, Congress regularly voted to raise the debt ceiling, giving government access to the cash it needed. |
This year, however, newly empowered Republicans have demanded steep cuts in government spending in return for raising the limit. | This year, however, newly empowered Republicans have demanded steep cuts in government spending in return for raising the limit. |
Mr Obama has proposed a package of up to $4 trillion in budget deficit reduction over the next 10 years, but Republicans have rejected that and other proposals because it calls for raising taxes. | Mr Obama has proposed a package of up to $4 trillion in budget deficit reduction over the next 10 years, but Republicans have rejected that and other proposals because it calls for raising taxes. |
'Childish' | 'Childish' |
In the Senate on Thursday Mr Reid called Mr Cantor "childish" and said he should not be part of debt negotiations any longer. | In the Senate on Thursday Mr Reid called Mr Cantor "childish" and said he should not be part of debt negotiations any longer. |
Mr Reid said that while some Republican leaders were willing to "negotiate in good faith", Mr Cantor "has shown he shouldn't even be at the table". | Mr Reid said that while some Republican leaders were willing to "negotiate in good faith", Mr Cantor "has shown he shouldn't even be at the table". |
Meanwhile, Mr Cantor, Mr Obama and other congressional leaders on Thursday afternoon resumed talks aimed at forging an agreement. | |
On Wednesday at the White House, President Obama was said to have demanded that budget negotiators find common ground by the end of the week. | On Wednesday at the White House, President Obama was said to have demanded that budget negotiators find common ground by the end of the week. |
He made the remark while heatedly rejecting Mr Cantor's call for a short-term deal based on spending cuts, according to Democratic officials and Republican aides familiar with the talks. | He made the remark while heatedly rejecting Mr Cantor's call for a short-term deal based on spending cuts, according to Democratic officials and Republican aides familiar with the talks. |
In testimony to Congress on Wednesday, Mr Bernanke said the Fed would renew stimulus efforts if the economy remained weak. | In testimony to Congress on Wednesday, Mr Bernanke said the Fed would renew stimulus efforts if the economy remained weak. |
The Fed expects to keep its ultra-low interest rate policy in place "for an extended period", he said. | The Fed expects to keep its ultra-low interest rate policy in place "for an extended period", he said. |
Analysts said that Mr Bernanke had only raised the possibility of a further stimulus, and was not saying that it was necessary. | Analysts said that Mr Bernanke had only raised the possibility of a further stimulus, and was not saying that it was necessary. |