- Fitch factored the January 6 riot into its decision to slash the US’s credit rating, per Reuters.
- It used the insurrection as an example of political polarization, a senior director told the outlet.
- The ratings agency announced a surprise downgrade Tuesday, rattling stocks.
Fitch factored the January 6 riots into its shock move to slash the US’s credit score Tuesday, according to Reuters.
The ratings agency flagged the pro-Trump insurrection as an example of the declining standard of governance in the US when it met with the Treasury before announcing its downgrade, senior director Richard Francis told the outlet.
“It was something that we highlighted because it just is a reflection of the deterioration in governance, it’s one of many,” he said.
“You have the debt ceiling, you have Jan. 6,” Francis added. Clearly, if you look at polarization with both parties … the Democrats have gone further left and Republicans further right, so the middle is kind of falling apart basically.”
Fitch cut the US’s credit rating from top-tier AAA to AA+ late Tuesday, citing “a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters”.
Two months ago, US President Joe Biden and House Republicans came to an 11 th-hour agreement to suspend the government’s borrowing limit until January 2025, preventing a catastrophic default after months of deadlock in Washington.
Fitch’s surprise announcement rattled markets, fueling a sharp drop in stocks that saw the S&P 500 slip 1%, the Nasdaq Composite plunge over 2%, and the Dow Jones Industrial Average shed just under 350 points Wednesday.
Biden administration officials immediately hit back at Fitch’s downgrade, which Treasury Secretary Janet Yellen called “arbitrary and based on outdated data”.
Fitch is the second of the “Big Three” ratings agencies to cut the US’s credit score.
S&P Global made a similar move in 2011, using political polarization as one justification for its decision.
American Dollar Exchange Rate