Updated 6:37 p.m. Eastern Time
Moody's Investors Service announced Wednesday afternoon that it has put the United States' Aaa bond rating under review "for possible downgrade given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations."
The announcement serves as a warning shot to lawmakers to act quickly to get a deal to raise the country's $14.3 trillion debt limit before Aug. 2. That's the date that the Obama administration says that the U.S. will hit its debt limit and no longer be able to pay its obligations, causing economic catastrophe.
Jeffrey A. Goldstein, Under Secretary for Domestic Finance at the Department of the Treasury, said in a statement that the Moody's assessment serves as a "timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package."
Meanwhile Michael Steel, a spokesman for House Speaker John Boehner, responded with this: "As Speaker Boehner has warned for months, if the White House does not take action soon to address our nation's debt crisis by reining in spending, the markets may do it for us. This action by Moody's today reinforces the Speaker's warning."
Moody's, one of the three big ratings agencies, said it was also reviewing the Aaa ratings of Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks because of their connection to the U.S. government as well as securities linked to the government or those financial institutions.
The United States has the best possible credit rating because of its history of paying its creditors on time, which has resulted in U.S. treasuries being seen as among the world's safest investments. Losing that rating would result in increased costs to borrow money for the U.S. government and the nation's businesses, creating worldwide financial havoc and potentially plunging the United States back into recession.
Mark Zandi, chief economist of Moody's Analytics, told CBS News the move wasn't a surprise -- but it is a big deal.
"This is it," he said. "If policymakers don't get it together in the next couple of weeks and raise the debt ceiling, financial markets will be thrown into turmoil and the economy into recession."
Former Former Federal Reserve Governor Rick Mishkin told CBS News that "this is basically the messenger coming and saying there is a real problem here -- and if you do not doing anything..things will get very difficult indeed."
"The rating agencies could easily change a debt rating before a default," he added. "That's their job."
Moody's describes the risk of "short-lived default" as "small but rising" due to the continued gridlock in Washington.
"An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a Aaa rating would likely no longer be appropriate," the agency said. It added that if even a short-lived default occurred, "A return to a Aaa rating would be unlikely in the near term."