It will be interesting to see how the reputation of the bond rating agencies fares in Washington in the next few days. They have been cited as the voice of reason, dispassionate and professional students of the bond market, and all around smart guys. Never mind that they missed the World Com, Enron, and Lehman Bothers implosions they were still the people to go to for sound advice. Now the agencies have gone Tea Party! Today Moody's said that the "limited magnitude" of spending cuts advanced by any plan are too meager to assure the country's AAA rating. It also strengthened the GOP's argument that the world would not end on August 2nd.
"If the debt limit is not raised before August 2, we believe that the Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days,"
If the Democrats still controlled the House Henry Waxman would have them before his committee Monday morning while he subpoenaed every email sent or received since the days of the dial-up modem. If an agreement is not reached soon I would expect to see them called before the Senate. In the meantime they have given every Republican congressman a sound reason to kill any bill that does not cut at least $4 trillion over ten years.
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