Wall Street is growing nervous about the congressional supercommittee amid warnings from major banks that failure to reach a deal could lead to another downgrade of U.S. debt.The bipartisan, 12-member panel has only until Nov. 23 to find at least $1.2 trillion in deficit cuts. Failure to strike a deal could rattle confidence in Washington and depress stock prices well into 2012, analysts say.
Fitch Ratings, one of the three major credit raters, said in August that failure by the supercommittee to agree to a $1.2 trillion deficit-reduction package "would likely result in negative rating action."
There have been no signs of progress from the secretive talks thus far. Sources close to the panel say members are deadlocked on basic questions about what policy issues to address and what budget scenarios to use.
In its outlook for this week, Bank of America Merrill Lynch said it "expects" a downgrade by one of the three credit agencies "when the supercommittee crashes."
Those analysts said the "not-so-super" committee is "very unlikely to come up with a credible deficit-reduction plan" because it is "hard to imagine" Democrats cutting entitlements or Republicans agreeing to tax increases.