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Monday
Oct242011

Merrill Lynch Warns of Another US Debt Downgrade

Jin Lee/Bloomberg via Getty Images(NEW YORK) -- The United States is in for another credit downgrade by year’s end if Congress fails to agree on a long-term plan to tame the nation’s $14.8 trillion deficit, Merrill Lynch warned.

In a research note, the Bank of America unit predicts that either Moody’s or Fitch will move to downgrade the U.S. AAA rating. Standard & Poor’s cut the nation’s bond rating in August, causing the stock and bond markets to tumble, after months of bickering by Congress on how to best reduce spending and cut the deficit. The United States spends about 40 percent more annually than it collects in taxes.

Instead of agreeing on spending cuts or new taxes, Congress and the president appointed a bipartisan “super committee” to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by Nov. 23. If there’s no deal, automatic across-the-board cuts mostly in discretionary spending would occur.  Congress would be free to stop any or all of those reductions, if it chooses and the president agrees.

Moody’s Investors Service hasn’t said what it will do if there’s no deal, but it has placed U.S. credit under review for a possible downgrade.

Copyright 2011 ABC News Radio







ABC News Radio