Markets React to S&P Downgrade of U.S. Credit

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Standard and Poor's unprecedented downgrade of the United States credit rating is the latest blow to confidence in the economy.

The Dow Jones industrial average was briefly down 600 points Monday, closing below the 11,000 mark for the first time since November.

S&P's move only adds to already growing fears that the country may be headed back into a recession.

"The political gridlock in Washington leads us to conclude that policy makers don't have the ability to put the public finances of the U.S. on a sustainable footing," said John Chambers, S&P managing director.

Ford O'Connell, a former presidential campaign advisor and the current chairman of the Civic Forum PAC, talked to CBN News about what can be done in Washington to stimulate the economy.  Click play for his comments. 

As the numbers in the financial markets plunged around the world, President Barack Obama suggested his Republican opponents in Congress were mostly responsible.

"We knew from the outset that a prolonged debate over the debt ceiling -- a debate where the threat of default was used as a bargaining chip -- could do enormous damage to our economy and the world's. That threat, coming after a string of economic disruptions in Europe, Japan and the Middle East, has now roiled the markets," he said.

China, America's biggest creditor, reacted to the downgrade saying, America must "come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone."

However, Treasury Secretary Timothy Geithner blasted S&P for the downgrade.

"I think S&P has shown really terrible judgment, and they've handled themselves very poorly and they've showed a stunning lack of knowledge about basic U.S. fiscal budget math," he said.

There had been talk about Geithner stepping down as treasury secretary, but with the debt crisis dragging on, he now says he'll stick around a little longer.

Meanwhile, Democrats blame the Tea Party for holding up the debt talks.

"This is essentially a Tea Party downgrade. The Tea Party brought us to the brink of a default," said David Axelrod, former White House advisor.

However, for many Americans worried about their own financial situation, the blame rests somewhere else.

"It's just a sign of the times. We're spending more than we're taking in and that's it. And I wouldn't be surprised if it goes down lower and people are going to have to pay a lot of interest on loans," said one person in New York City's Times Square.

S&P also downgraded the federal home loan banks Fannie Mae and Freddie Mac, and warned the U.S. rating could drop another level if Washington doesn't make significant cuts on its debt in two years.

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