United States' Credit Rating Downgraded By Standard & Poor's
On Friday, August 5, 2011, Standard & Poor’s credit rating agency downgraded the United States’ credit rating from the highest rating of AAA to AA+. The agency lowered the rating the same week lawmakers in Washington, D.C. voted to increase the United States’ debt limit. Standard &Poor’s is one of the three main credit rating agencies. The other two are Moody’s Investors Services and Fitch.
The credit rating drop was the first since the United States received the highest rating in 1917. Credit ratings are used to determine the ability of a nation (or corporation) to repay its debt as issued in the form of bonds.
The downgrading of the credit rating may make future borrowing more costly. Bonds that are perceived to be more risky attract purchasers through offering higher interest rates. The higher interest rates the United States may be forced to offer may, in turn, force interest rates within the United States higher. That could result in higher rates for everything from credit cards to home and business loans.
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William T. Repasky practices with the Litigation Department at Frost Brown Todd. He focuses on lending and commercial services; banking litigation and financial institutions.