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Major Credit Ratings Agency CEO Is Pretty Confident About How the Debt Ceiling Fight Will End


"...we've seen this movie before."

Even if Congress fails to come to an agreement on increasing the nation’s borrowing limit, it’s “extremely unlikely” the U.S. will default on its payments, the CEO of influential credit ratings agency Moody’s said Sunday.

The Moody's Investors Service Inc. logo is displayed outside of the company's headquarters in New York, U.S., on Thursday, July 28, 2011. (Getty Images)

"It is extremely unlikely that the Treasury is not going to continue to pay on those securities," Moody's CEO Raymond McDaniel said in an interview with CNBC.

U.S. lawmakers have until Oct. 17 to figure out a deal on raising the nation’s $16.7 trillion borrowing limit before the Treasury Department hits its payment deadlines. A default would obviously be harmful for the U.S.’s credibility and the economy.

"Hopefully it is unlikely that we go past Oct. 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the U.S. Treasury is still going to pay on those Treasury securities," McDaniel said.

Markets have so far dealt calmly with Washington’s gridlock, showing no sign of panic or worries. The calm is all the more remarkable considering that President Barack Obama himself told Wall Street last week it should be more “concerned” with the debt ceiling fight.

McDaniel said the calm could be attributed to the fact that markets remember the 2011 debt ceiling fight and they remember how it was eventually resolved.

"[It] feels a lot like we've seen this movie before," said McDaniel. "Ironically because we have had this experience in the recent past [it] gives people more of a sense of calm than perhaps they should have."

"The fact that the market is reacting more calmly is good, but to the extent that policy makers are going to act when stress or distress reaches a certain level, the market can play a role in indicating that," he added.

As of this writing, there doesn’t appear to be an end in sight for the partial government shutdown, now into its second week.

The U.S. has a triple-A rating and a “stable outlook” with Moody’s. S&P, however, downgraded the U.S.’ credit rating to AA-plus from its triple-A rating in 2011. S&P also has a “stable outlook” reading for country.

Fitch rates the U.S. AAA with a “negative outlook.”


Follow Becket Adams (@BecketAdams) on Twitter

Featured image Getty Images.


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