“ ‘The numbers justified it, regrettably.’”
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,” Schwarzman said in a CNBC interview on Friday. “We’re running huge deficits now.”
Fitch Ratings late Tuesday lowered its rating on the U.S.’ long-term foreign currency issuer default rating to AA+ from AAA, saying that it reflects “expected fiscal deterioration,” a “high and growing” government debt burden and an “erosion of governance” in face of multiple debt-limit standoffs.
See: What Fitch’s U.S. credit downgrade means for investors
Fitch’s ratings downgrade was the first for the U.S. sovereign debt since Standard & Poor Global Ratings took the same step in 2011, cutting the nation’s credit rating to AA+ from AAA also after a debt-ceiling standoff in Congress. Moody’s Investors Service has kept its U.S. credit rating at Aaa, its highest, and remains the last of the three major credit credit-rating firms to maintain a top rating for the country.
Treasury Secretary Janet Yellen on Wednesday slammed the move by Fitch Ratings, calling it “arbitrary and based on outdated data” as it came two months after a debt-ceiling agreement that averted a U.S. default. She said the decision “does not change what Americans, investors, and people all around the world already know: that Treasury securities remain the world’s pre-eminent safe and liquid asset, and that the American economy is fundamentally strong.”
See: Warren Buffett dismisses Fitch downgrade: ‘There are some things people shouldn’t worry about’
Schwarzman said regardless of the rating, 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’s a crisis in the world, they buy our securities,” he said on Friday.
“Now that doesn’t last forever if you don’t keep some discipline. And so in a way, it’s a bit of a shot across the bow,” Schwarzman said.
U.S. stocks were holding gains Friday following the July jobs report, with the Dow Jones Industrial Average
DJIA
up 170 points, or 0.5%, while the S&P 500
SPX
also advanced 0.5%.
