Political dysfunction erodes confidence of rating agencies, investors
http://www.msnbc.msn.com/id/43895856/ns/business-eye_on_the_economy/As Washington dithers over raising the nation's debt ceiling, investor confidence is flowing away.
There's a week left before the Aug. 2 deadline to raise the federal government's borrowing authority so it can pay its bills on time to avoid a default. Bond rating agencies and the investors who rely on them are rapidly losing conviction that debt issued by a dysfunctional government is a risk-free bet that deserves a top-notch credit rating.
"The issue is not just whether Moody's or Standard and Poor's were to downgrade (U.S. Treasury debt), it's whether the market decides to downgrade," said Rochdale Securities bank analyst Richard Bove.
"If they lose faith in the Congress and the government to, in essence, create a solid security for the buyers of that security, then you get the downgrade," he said.