DTN News - U.S. FINANCIAL CRISIS OVER?: Default Avoided But Fears On Economy Remain....NSI News Source Info # 2288

DTN News - U.S. FINANCIAL CRISIS OVER?: Default Avoided But Fears On Economy Remain....NSI News Source Info # 2288

(NSI News Source Info) TORONTO, Canada / WASHINGTON - August 3, 2011:

The United States stepped back from the brink of default on Tuesday but congressional approval of a last-ditch deficit-cutting plan failed to dispel fears of a credit downgrade and future tax and spending feuds.

President Barack Obama and lawmakers from across the political divide expressed relief over the hard-won compromise to raise the country's borrowing authority after weeks of rancorous partisan battles.

Nevertheless, U.S. stocks tumbled, turning negative for the year, as investors shifted their attention to the increasingly grim state of the U.S. economy and the potential for a downgrade of America's gold-plated debt rating.

That risk grew when one of the three major ratings agencies said it was affirming the U.S. government's AAA-rated sovereign debt but slapping it with a negative outlook.

The announcement by Moody's Investors Service after U.S. markets closed could lead to a downgrade within 12 to 18 months. That could raise borrowing costs for U.S. companies and consumers as the economy risks slipping back into recession.

The Senate's approval by 74-26 votes of the $2.1 trillion deficit-reduction plan warded off the immediate specter of a catastrophic U.S. debt default. The bill passed the Republican-controlled House of Representatives on Monday.

Obama immediately signed it into law, lifting the $14.3 trillion debt ceiling with just hours to spare before the government was due to run out of money to pay all its bills.

http://defense-technologynews.blogspot.com/2011/08/dtn-news-us-financial-crisis-over.html