Fitch May Or May Not Downgrade U.S.

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Fitch Ratings placed the U.S.'s pristine triple-A rating on watch for downgrade Tuesday as the federal government runs short on time to raise the nation's borrowing limit. The Fitch warning comes as the House and Senate work on competing plans to raise the U.S.'s borrowing limit and fully reopen the federal government. The Treasury Department, which has used extraordinary steps to continue paying its bills for roughly two weeks, says it will exhaust those powers on Thursday...Fitch said a failure by the government to honor interest or principal payments on U.S. Treasury securities would lead it to downgrade the U.S.'s sovereign issuer-default rating to "restricted default." It would also slash the affected issues to B-plus from triple-A. [WSJ]

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"Manageable" but "raises questions." Fitch Ratings has downgraded JPMorgan Chase & Co.'s (JPM) Long-term Issuer Default Rating (IDR) to 'A+' from 'AA-' and its Short-term IDR to 'F1' from 'F1+'. Fitch has placed all parent and subsidiary long-term ratings on Rating Watch Negative. Fitch has also downgraded JPM's viability rating (VR) to 'a+' from 'aa-' and placed it on Rating Watch Negative. In addition, Fitch affirmed JPM's '1' support rating and 'A' support rating floor. The rating actions follow JPM's disclosure yesterday of a $2 billion trading loss on its synthetic credit positions in its Chief Investment Office (CIO). The positions were intended to hedge JPM's overall credit exposure, particularly during periods of credit stress. Fitch views the size of loss as manageable. That said, the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity. It also raises questions regarding JPM's risk appetite, risk management framework, practices and oversight; all key credit factors. Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an 'AA-' rating. Fitch Cuts JPMorgan Ratings [Reuters]