President Barack Obama will hold a news conference at the White House
Friday morning to discuss his negotiations with congressional leaders
over raising the national borrowing limit and decreasing the deficit.
At the end of a fifth day of talks Thursday, Obama told negotiators it
is "decision time," and gave them until Saturday at the latest to
evaluate their options in hopes of reaching some kind of an agreement.
Meanwhile, the top two leaders in the U.S. Senate are working on a
proposal that will allow the president to raise the debt limit on his
own without prior congressional approval. Democratic Majority Leader
Harry Reid said talks are focused on Republican leader Mitch McConnell's
plan that would give Obama the authority to raise the debt limit by $2.5
trillion in three separate installments, while imposing several trillion
in spending cuts over the next decade.
Obama and congressional leaders are in contentious negotiations to raise
the $14.3-trillion borrowing limit while also cutting spending. But
talks have stalled over disagreements about the need to raise taxes. If
the borrowing limit is not raised by August 2, the U.S. may have to stop
payments on some of its obligations.
The powerful credit rating agency Standards and Poors has put the United
States on its credit watch list, warning there is a "substantial
likelihood" it could downgrade the country's triple-A rating because of
the ongoing battle over decreasing the deficit and increasing the
In a statement Thursday, the rating agency said it believes there is an
increasing risk of a "substantial policy stalemate" that would continue
even if politicians manage to agree to raise the debt ceiling in the
short term. S&P said it may lower the U.S. rating within the next three
months if it finds the government has not, or is not close to, achieving
"a credible solution" to the problem of the ballooning national debt.
S&P joins Moody's Investors Service, which warned Wednesday the U.S.
risks losing its top credit rating if lawmakers fail to reach a deal. A
downgraded U.S. bond rating would likely lead to higher interest rates
for U.S. loans.
Wall Street warning
Top U.S. financial officials Thursday issued a new round of warnings
about the potential catastrophe that awaits if lawmakers fail to raise
the country's debt limit in time.
Treasury Secretary Timothy Geithner said Washington needs to meet its
financial obligations and "it's time we move."
Federal Reserve Chairman Ben Bernanke told a Senate committee any
failure to raise the debt limit would have a "calamitous outcome." He
warned excessive spending cuts could damage the fragile economic
There are also growing calls from businesses and banking firms for a
head of one of the biggest private U.S. financial firms Thursday told
reporters it is "imperative that the debt ceiling be fixed."
JP Morgan Chase Chief Executive Jamie Dimon said it would be
irresponsible for the country to default on its debt because the result
could be catastrophic.
A Chinese credit rating agency said Thursday it has placed U.S.
sovereign debt on a negative watch. Dagong Global Credit Rating Company
says it will downgrade U.S. credit ratings "if there is no significant
change in its repayment ability within the period of observation." China
is the biggest buyer of U.S. sovereign debt.