Debt showdown 3

President Barack Obama sits with House Speaker John Boehner of Ohio, and Senate Minority Leader Mitch McConnell of Kentucky, and Sen. Dick Durbin, D-Ill., as he meets with Republican and Democratic leaders in Washington on Wednesday.

AP Photo/Charles Dharapak
Associated Press

Amid new warnings and fresh signs of strain, President Barack Obama and congressional leaders are entering a perilous debt-limit endgame. The president, declaring “enough is enough,” is demanding that budget negotiators find common ground by week’s end even as the Senate’s top Republican gained followers for his own last-ditch scheme to avoid a government default. The continuing impasse was unsettling Wall Street, which up to now had performed as if an increase in the debt ceiling was not in doubt.

And the looming Aug. 2 cutoff for action was creating new tensions between the president and Republican leaders.

Moody’s Investors Service said Wednesday it will review the government’s credit rating, noting there is a small but rising risk that the government will default on its debt.  If Moody’s were to lower the ratings, the consequences would ripple through the economy, pushing up rates for mortgages, car loans and other debts.

A Chinese rating agency, Dagong Global Credit Rating Co., also warned of a possible downgrade.

Federal Reserve Chairman Ben Bernanke, addressing lawmakers, warned Wednesday that not increasing the nation’s debt ceiling and allowing the nation default on its debt would send “shock waves through the entire financial system.”

And in the cauldron of the White House Cabinet Room, Obama and top lawmakers bargained for nearly two hours Wednesday on spending cuts. Obama  ended the session when House Majority Leader Eric Cantor, R-Va., urged Obama to accept a short, monthslong increase in debt instead of one that would last through next year’s presidential election.

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