(Reuters) - Standard & Poor's reiterated on Thursday it sees a real risk that future U.S. government deficits may meaningfully miss discussed targets and that there is a 50-50 chance the U.S. AAA credit rating could be cut within three months, perhaps as soon as August.
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If an agreement is reached to raise the debt ceiling but nothing meaningful is done in terms of deficit reduction, the U.S. would likely have its rating cut to the AA category, S&P said.
"While banks and broker-dealers wouldn't likely suffer any immediate ratings downgrades, we would downgrade the debt of Fannie Mae, Freddie Mac, the 'AAA' rated Federal Home Loan Banks, and the 'AAA' rated Federal Farm Credit System Banks to correspond with the U.S. sovereign rating," S&P said in its report.
"We would also lower the ratings on 'AAA' rated U.S. insurance groups, as per our criteria that correlates insurers' and sovereigns' ratings," the firm said.
However, S&P said it sees a failure to reach an agreement on raising the debt ceiling and reducing deficits as the least likely scenario, adding that in such a case the global financial markets would be in turmoil and "likely shove the U.S. economy back into recession."
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http://www.reuters.com/article/2011/07/21/usa-ratings-sandp-idUSN1E76K0P120110721
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