Posted at 08/10/2011 6:14 PM | Updated as of 08/10/2011 6:14 PM
CERRITOS, California – Members of the Filipino American Chamber of Commerce of Orange County are worried that the recent downgrade of America’s credit rating from AAA to AA+ will negatively impact their businesses.
Jun Jao, a vice president of the Hay of California Insurance Services, said the effects of the Standard and Poor’s (S&P) credit rating could trickle down to his company’s clients.
He said the credit downgrade could tighten overnight lending standards, and could make it difficult for businesses to borrow money to meet operating costs.
“We’re probably going to see a lot of our companies closing shop and laying off employees. So it could have a big effect on the insurance industry,” he said.
Jao is hoping another government initiative can offset any losses during these tough times. He’s expecting the healthcare reform bill to bring more to his insurance business.
Jewelry manufacturer Jules Barba is worried that the possible job losses that could result from businesses closing shop may mean slower manufacturing. Manufacturing is one of the pillars of the US economy.
“When there is fear of losing a job then you don’t spend the money and that affects our business,” said Barba, who owns JB Diamonds & Fine Jewelries.
The entrepreneurs believe the possibility of a second recession will force them to become creative.
S&P also downgraded the credit rating of two key private companies that receive federal financing, Freddie Mac and Fannie Mae, that guarantee half of all mortgage loans in the US, reported CNN.
Both received a lower credit rating of AA+, from its previous AAA rating. S&P said the downgrades reflect their “direct reliance on the US government.”
“Certainly, the downgrade could have negative impact effect in terms or rising interest rates,” realtor Lawrence Yun told CNN. “You can damage consumer confidence and many people who are ready to enter the housing market may become more hesitant about entering.”
Homeowners with adjustable mortgages about to reset may find themselves with higher monthly payments, if interest rates were to go up.
Meantime, S&P’s credibility has been questioned, following its decision to downgrade America’s credit rating. The agency said it doubted the country’s moves to reduce its long-term deficit, and the ability of the country’s leadership to solve its problems.
A recent USA Today Poll reflected the public’s dissatisfaction: 56 percent believe incumbent representatives in Congress should not be re-elected.
Economists criticizing S&P have argued that the US can repay its debt. Another credit rating agency, Moody’s, has maintained the country’s triple A credit rating.
*The world financial roller coaster is entering full speed!
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