A Standard & Poor’s executive says the agency will give the U.S. government its lowest credit rating if Congress fails to raise the borrowing limit and the United States defaults on its debt. The government reached its $14.3 trillion borrowing limit in May. The U.S. Treasury says it will default on its debt if that limit is not increased by Aug. 2. Should that happen, the U.S. would lose its AAA rating and receive a D, said John Chambers, managing director of sovereign ratings at S&P, in an interview today with Bloomberg Television.
A lower credit rating would force the government to pay higher interest rates on Treasury bonds and notes. That would make mortgages and consumer loans more expensive because most loans track the yields on U.S. treasuries. But such an outcome is unlikely, Chambers says. He expects the White House and Congress to reach an agreement before the deadline. “We think the government will raise the debt ceiling,” he says. “They’ve raised it 78 times … since 1960, often at the last moment. We think that will be the case this time.”
