GOP Threatening both U.S., Israeli Economies By Blocking Debt Ceiling Agreement

David Streeter — July 14, 2011 – 4:53 pm | Congress | Domestic Policy | Economy | Foreign Policy | Israel | Republicans Comments (0) Add a comment

The National Jewish Democratic Council (NJDC) today criticized House Republicans for threatening both America’s and Israel’s economies by continuing to block any agreement on the debt ceiling. According to Moody’s Investors Service, all bonds guaranteed by the United States government—which includes certain bonds issued by the State of Israel—will be impacted by their review of the United States’ credit rating. (See below for more information.)

NJDC President and CEO David A. Harris said:

Republicans profess to be fiscally responsible, yet they are playing a dangerous game both with our economy and Israel’s by blocking an agreement on the debt ceiling. It was already common knowledge that if GOP leaders continue to refuse to budge and meet President Barack Obama halfway, millions of Americans will begin to suffer in early August as essential government services are drastically cut. But Moody’s recent announcement that Israeli government-issued bonds may be impacted as part of their review of America’s credit rating should be additionally concerning to any Israel supporter. By refusing to raise the debt ceiling and agree to any kind of compromise, Republicans are risking both the American and Israeli economies - as well as the welfare of all Americans.

The relevant portion of the announcement by Moody’s Investors Service says: 

In addition to the financial institutions directly linked to the US government, Moody’s has also placed on review for possible downgrade pre-refunded municipal bonds (which are invested in government or related securities), certain housing bonds that are supported or guaranteed by the US government, and other municipal ratings that are directly linked to the rating of the US government. Bonds issued by the governments of Israel and Egypt that are guaranteed by the US government were also placed on review for possible downgrade. [Moody’s, Press Release July 13, 2011]

In the announcement’s opening statement, they explain: 

Moody’s Investors Service has placed the Aaa bond rating of the government of the United States on review for possible downgrade given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations. On June 2, Moody’s had announced that a rating review would be likely in mid July unless there was meaningful progress in negotiations to raise the debt limit. 

In conjunction with this action, Moody’s has placed on review for possible downgrade the Aaa ratings of financial institutions directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks. We have also placed on review for possible downgrade securities either guaranteed by, backed by collateral securities issued by, or otherwise directly linked to the US government or the affected financial institutions. [Moody’s, Press Release July 13, 2011]

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