Blackstone chief executive officer Steve Schwarzman said Fitch Ratings' recent downgrade to long-term U.S. debt was justified, and it is a shot across the bow after repeated debt-ceiling standoffs over the borrowing limit make the U.S. government less trustworthy than before.
We ve had an explosion of debt since the global financial crisis and we don t appear to have a lot of discipline going forward, Mr. Schwarzman said on CNBC. We're running huge deficits now. Fitch Ratings late Tuesday lowered its rating on the U.S. long-term foreign currency issuer default rating from AAA to AA, saying it reflects expected fiscal deterioration, a high and growing government debt burden and an erosion of governance in response to multiple debt-limit standoffs.
What is the impact of Fitch's credit downgrade on investors?
Fitch's ratings downgrade was the first for the U.S. sovereign debt since Standard Poor Global Ratings took the same move in 2011 to cut the nation's credit rating to AA from AAA after a debt-ceiling standoff in Congress. Moody's Investors Service has kept its credit score at Aaa, its highest, and remains the last of three major credit-rating firms to maintain a top rating for the nation.
Fed Secretary Janet Yellen criticized the move by Fitch Ratings, which came two months after a debt-ceiling agreement that averted a U.S. default. The decision does not change what Americans, investors, and people all over the world already know: that Treasury securities are the world's pre-eminent safe and liquid asset, and that the American economy is fundamentally strong. Warren Buffett dismisses Fitch's downgrade, saying: There are some things people shouldn t worry about, the U.S. dollar is the world's reserve currency. We do defend a large part of the world, including people who have triple As, and when there is a crisis in the world, they buy our securities, he said on condition of anonymity.
Now that doesn t last forever, it doesn t last forever if you don t follow some discipline. And so in a way, it s a bit of a shot across the bow, Schwarzman said.
The Dow Jones Industrial Average DJIA climbed 170 points, or 0.5%, as the S&P 500 SPX rose 0.5%, following the July jobs report.