White House Warns of Stress in Global Markets
White House chief of staff Bill Daley said the U.S. government's creditworthiness has already been damaged by the prolonged debate over how to raise the debt ceiling, with the Obama administration girding for volatility in global financial markets as soon as Sunday evening.
Treasury Department officials have said the U.S. must have a deal in place by Aug. 2 to raise the debt ceiling or the country could begin defaulting on its obligations. Numerous proposals to raise the debt ceiling in the past few months have fallen apart or been blocked.
Administration officials would like to make significant progress toward a deal by Sunday evening to ensure that Asian markets open calmly.
Treasury Secretary Timothy Geithner said on "Fox News Sunday" it was difficult to predict how markets would react on Monday but that "the longer the politicians take," the more investors will "wonder whether this place can work again."
Speaker of the House John Boehner (R., Ohio) said on Fox News Sunday, when asked about trying to get a deal by the open of Asian markets Sunday, that "while Asia may be important, this is about American jobs and the American economy."
Another rising risk is that the U.S.'s credit rating could be lowered soon by Standard & Poor's. S&P has said there was a 50% chance it could reduce its AAA rating on U.S. debt to AA+ within 90 days, putting in jeopardy the top-notch rating the U.S. government has had for 70 years. A downgrade could have a variety of consequences, such as making it more expensive for the U.S. to borrow money and creating turmoil in the banking system.
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