Moody’s Maintains AAA Credit Rating to US

Last Tuesday, credit rating agency – Moody’s – said that US will retain its AAA rating for the time being. However, its outlook was down to “negative.” The Negative Outlook indicates the possibility that Moody’s would downgrade the country’s credit rating within a year or two.

Moody’s move was made after the Washington debate on whether to raise the country’s $14.3 billion debt ceiling. The rating agency also added that the political deal to raise the debt ceiling has now “virtually eliminated the risk of such a default.”

But even though the risk of default is gone, Moody’s pointed out that lawmakers must take additional steps and keep their promise.

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White House Staff Revealed Tweets Influenced Debt Ceiling Deal

A White House aide stated during a Twitter conversation on Sunday night that the micro-blogging site influenced the upcoming result of the agreement on the U.S. debt ceiling. The said conversation is between Brian Stelter, a reporter from The New York Times, and Dan Pfeiffer, the White House communications director.

The House and Senate are expected to vote on the debt ceiling bill on today.

President Obama asked people to tweet their congressmen Friday to persuade them to come to an agreement on setting the debt ceiling with the hashtag #compromise. Then his staff spent a day tweeting out names of Republican legislator from every state of US. Due to the said move, the @BarackObama account lost 36,000 followers. However this new information might indicate it may have been worth it.

Following the said conversation, members of the Congress also took the opportunity to fire back to the president using Twitter.

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Obama Encourage People to Tweet Members of Congress

U.S. President Barack Obama used again Twitter to mobilize the people of America. In his statement today, President Obama invited the people to “call, email and Tweet” the lawmakers with regards to the debt ceiling issue.

In a desperate move to protect the funds of the U.S. treasury, Obama relies to the power of Twitter users to demand the members of the congress to increase the ceiling.

It is remarkable that the President included ‘tweeting’ as a significant method in communicating messages to the lawmakers. Some say that this is a major form of endorsement for the micro blogging site.

 

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In Case US Defaults: California Borrows $5.4 Billion

Gearing up for bond market turbulence, the state of California considered asking Wall Street for a bridge loan. It is now reported that the state’s Treasurer Bill Lockyer already secured $5.4 billion from short-term loans, with Goldman Sachs and Wells Fargo carrying out the loan bulks. This bridge loan will aid the state in case the Congress fails to raise the $14.3 trillion debt ceiling by August 2.

However, the Treasurer Bill Lockyer fears that US default could lock California out of the municipal market. Moreover, the US default shock wave is believed to reverberate across the financial system, causing state and local finance crises.

In addition to this, Moody’s Investors warned that US’ loss of AAA credit rating would push automatic ranking cuts on at least 7,000 municipal ratings.

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Moody’s Investors Services Puts US Bond Rating on Review

The pressure on lawmakers to raise the debt ceiling fired up last Wednesday, as Moody’s Investors Services brings the US bond rating into review. The move was made due to the “rising possibility” that Congress will be unable to raise the debt ceiling by August 2. If that will be the case, it could lead US’ debt on default. Moreover, the Treasury Department will be unable to pay the country’s bill in full and on time without being allowed to lend new money.

But even if lawmakers raise the debt ceiling in time, Moody’s pointed out that it is expecting progress on the long-term debt. Hence, the agency would likely change their outlook on US’ AAA rating from “stable” to “negative.”

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Top Republicans Support Tax Subsidies Cut and Debt Ceiling Raise

Last Sunday, top Senate Republicans stated that they support the cut on tax subsidies in relation to a deal to lower deficit and raise the debt ceiling. Sen. John McCain and Sen. John Cornyn indicated that they are for ‘revenue raisers’ in order to avert government default, and not the tax increases. Sen. John Cornyn even said in Fox News Sunday:

“I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery. Now, do we believe tax reform is necessary? I would say absolutely.”

The Republican senators’ statements end the week-and-a-half-long negotiations on debt ceiling, and welcome the deal to include cuts to corporate subsidies ordered by the Barrack Obama administration. The government instructed that a deal must be reached by July 22, so that it can be implemented by August 22.

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