Moody's to States: Your Credit's at Stake, Too

Federal standoff could drag down Maryland, Virginia, others
By Kevin Spak,  Newser Staff
Posted Jul 20, 2011 12:20 PM CDT
Tea Party supporters hold signs across from a rally held by the American Federation of State, County and Municipal Employees in front of the Maryland State Capitol building on March 14, 2011.   (Getty Images)

(Newser) – At least five state governments have been warned that if the federal government’s credit rating falls, theirs will drop along with it. Virginia, Maryland, Tennessee, New Mexico, and South Carolina are all in the danger zone, the Washington Post reports. “Through no fault of our own, we have a AAA bond rating since 1938 that we have been informed just hours ago may be in jeopardy,” said Virginia’s governor. “We’re furious.”

Maryland and Virginia would face a downgrade because so many of their residents rely on federal jobs. The other three states, meanwhile, all rely on bonds that would see rate spikes if the federal credit rating fell. The warnings are particularly troublesome for Maryland, which is about to issue $500 million in bonds to fund school construction. While those will still technically be AAA bonds, investors may demand higher rates because of the credit watch.

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