Maryland, Virginia Face Downgrade of Credit Rating

Moody's cites high federal employment, medicaid among risk factors

By Kathy Banks
|  Wednesday, Jul 20, 2011  |  Updated 2:17 PM EDT
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Federal Default Threatens MD, VA Credit

AP

Credit rating company Moody's warns that Maryland and Virginia's AAA credit rating are at risk if the nation defaults.

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As the nation's credit goes, so do the ratings of Maryland and Virginia.

Those two states are among five that face a possible downgrade of their AAA credit rating, according to a Moodys.com report if the nation's credit gets downgraded.  Rating agencies have already warned that the United States credit rating will get a downgrade if it defaults on debts due in August.

Moody’s Investors Service says it is reviewing the five states’ credit ratings because of their high risk factors. High federal employment and Medicaid percentages were cited among the factors.

“While all states are indirectly linked to the U.S. government to some degree, we have identified the five AAA-rated states that are most vulnerable to changes in the U.S. government rating," said Nicholas Samuels, a Vice President in Moody's State Ratings Team. These five states have above average exposure to several sovereign risk factors that Moody's outlined in a July 13 special comment, "Implications of a U.S. Rating Action for Aaa-Rated U.S. Municipal Credits."

Moody's said it will review the ratings of the five states on a case-by-case basis and announce any rating actions within seven to ten days.

Moody's is a holding company that - among other things - ranks the credit-worthiness of commercial and government borrowers using a standardized ratings scale.
 

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