S&P put the U.S. government on notice in April that the nation risks losing its AAA standing unless policy makers agree on and begin "meaningful implementation" of a plan by 2013 to reduce budget deficits and the national debt. S&P would cut the country's sovereign rating if a deal on the debt ceiling isn't reached, affecting all Treasury securities, Chambers said.
A U.S default would cause upheavals in world financial markets that would be "much more chaotic" than after the bankruptcy of Lehman Brothers Holdings Inc. in 2008, he said.
Ratings directly linked to the U.S. government would move in step with any sovereign action, while some Aaa rankings of state and local governments may be vulnerable, Moody's said in its report yesterday.
The U.S. would risk not winning back its top Aaa credit soon if the nation's debt limit causes even a short-term default, Steven Hess, the senior credit officer at Moody's, said earlier this month.
Rating Review
A default stemming from "the debt limit and the political configuration would indicate that, well, this might happen again," Hess said. "That risk is perhaps not compatible with Aaa."
Moody's said on June 2 that it would put the U.S. credit rating under review for a downgrade unless there's progress on increasing the debt limit by mid-July.
U.S. lawmakers are "very likely" to raise the debt ceiling limit before Aug. 2, Fitch Ratings said June 21, even as it reiterated that failure to do so would result in the country being placed on rating watch.
Obama said in a news conference yesterday that a default would hurt the U.S. economy.
"The yellow light is flashing," he said. "If capital markets suddenly decide, 'You know what? The U.S. government doesn't pay its bills, so we're going to start pulling our money out,' and the U.S. Treasury has to start to raise interest rates in order to attract more money to pay off our bills. That means higher interest rates for businesses. That means higher interest rates for consumers."