Fitch Ratings placed U.S. credit on negative watch Tuesday, sending a message to lawmakers that the nation's debt limit must be raised soon to maintain the nation's AAA credit rating.
The ratings agency faulted the country's "political brinkmanship" for the possible downgrade, even though it believes that the debt ceiling will be raised in time to avert a default. The Treasury's use of accounting maneuvers to create room under the debt ceiling, it warned, has increased the risk of a default.
Fitch also said that the ongoing negotiations over the debt ceiling risk "undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S." It also warned that the repeated standoffs over the debt limit have damaged the "confidence in the effectiveness of the U.S. government and political institutions."
Fitch is one of 10 ratings agencies officially recognized by the Securities and Exchange Commission.
Another ratings agency, Standard and Poor's, made waves by downgrading U.S. debt from AAA to AA+ following the debt limit standoff in 2011, the first time U.S. credit was downgraded. S&P said earlier in the month that it does not anticipate further changes to the status of the nation's credit in the current legislative battle.
Senate Majority Leader Harry Reid had warned Tuesday morning that a downgrade could come Tuesday night if Congress didn't act, although he did not explain how he obtained that information.
Fitch warned that if the U.S. misses a payment on a Treasury bond, its credit will be downgraded from AAA to B+, the highest rating possible for obligations in default. If the country avoids default, the determination of a credit downgrade will rest on the likelihood that the government will lower deficits and the debt as well as the impact of the "debt ceiling brinkmanship and government shutdown" on the country's "government and political institutions."