Tags: US | Downgrade | Cost | Investors | 100 Billion

US Downgrade Could Cost Investors $100 Billion

Monday, 27 Jun 2011 10:21 AM

Investors in U.S. debt could lose $100 billion if ratings agencies scrap the U.S. of its AAA bond ratings, according to a research arm of McGraw-Hill, the parent of Standard & Poor’s.

The U.S. has hit its $14.3 trillion debt ceiling, and administration officials have said that unless Congress approves lifting the borrowing limit, the government will default.

Ratings agencies have said they could downgrade the U.S. should such a scenario come to pass.

"If Standard & Poor’s or any of the other major rating agencies downgrade the U.S., Treasurys would likely drop in value, possibly by as much as $100 billion," say analysts at S&P Valuation and Risk Strategies, a McGraw-Hill research team separate from the agency, The Financial Times reports.

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(Getty Images photo)
Talks have broken down among Democrats and Republicans over raising the ceiling, with Republicans demanding spending cuts in exchange for raising the limit while Democrats insist that government revenues must be raised, which Republicans claim are tax hikes.

"The whole business of raising taxes, regardless of how you go about it, is something that this Congress is not likely to do," says Republican Senate leader Mitch McConnell on ABC's "This Week."

Democrats insist that they are not out to raise taxes but rather, want to close certain loopholes in an effort to increase government revenue to help narrow government deficits.

"We want to close those loopholes up. We do not want to raise anybody's tax rates. That's never been on the table," says Democratic Representative James Clyburn on "This Week."

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Investors in U.S. debt could lose $100 billion if ratings agencies scrap the U.S. of its AAA bond ratings, according to a research arm of McGraw-Hill, the parent of Standard Poor s. The U.S. has hit its $14.3 trillion debt ceiling, and administration officials have said...
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2011-21-27
Monday, 27 Jun 2011 10:21 AM
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