Fitch puts U.S. on notice for downgrade

Rating agency Fitch put the U.S. on notice Tuesday for a possible downgrade, with lawmakers still struggling to resolve the debt ceiling crisis.
Fitch still has the U.S. rated AAA, the highest possible grade, but the country is now on "rating watch negative," meaning that there is increased possibility of a downgrade in the near future.

"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default," the agency said in a statement.

A Treasury Department spokesperson said the announcement "reflects the urgency with which Congress should act to remove the threat of default hanging over the economy."

Rating agencies assess the risk that debtors, including countries and companies, won't be able to repay the money they borrow from investors.

If the debt ceiling isn't raised by Thursday's deadline, the Treasury Department will not be able to borrow money to cover all its obligations, which include not only interest payments, but also Social Security, Medicare, military pay and much more.

It's unclear exactly when Fitch will make a final decision on whether to go through with a downgrade.

Should the U.S. miss a debt payment, it would immediately be downgraded to "RD" -- short for "restricted default" -- until the situation is resolved.

But the agency also indicated next steps hinge in part on what Congress does. One factor: How lawmakers finally decide to raise the limit, and for how long.

Fitch said it would "take into account the manner and duration of the agreement and the perceived risk of a similar episode occurring in the future."