early detection can save your life. give to save lives and reach for the cure. call now or log on to childrensdiabetesfoundation.org. >> hello everyone. welcome. i am gerri willwillis. global financial markets are falling tonight the first reaction to the downgrade by sta standard & poors. gold the new high. we are koring the story from all angels especially how this will effect the u.s. economy and your money on main street. this is a huge political story as well. joining me matt mccall the ceo of financial group and liz

macdonald. smith is live in the fox business newsroom. white house is on the phone with me right now. we have talked a lot about how the white house is doe fending itself attacking standard & poors. what's your reaction? >> the reaction is a two-pronged approachment trying to discredit what standard & poors is doing. southbounding np handled themselves poorly he said shows lack of knowledge about u.s. basic budgeting and math and s&p showed terrible judgment in all of this. second piece is to say the president in the budget deal asked for a much larger type of proposal to cut u.s. deficits siting a number of 12 trillion in ten years. democrats never put that size of a budget plan or budget proposal on the table. the president outlined in a

speech after he put out his budget put out another budget in which he outlined some 2 and a half trillion dollars in savings over ten years according to independent an nail sis. democrats are never serious about curbing entitlements. you have heard republicans don't want to raise taxes on any one especially families earning $250,000 a year. that says about what happens next. part the budget deal raise the debt ceiling and first we are cutting 900 billion in capping spending by about that much over ten years. then it leaves the rest of the decision making to a commission that has to find 1 and a half trillion dollars. s&p staked itself to the number of cutting 4 trillion in deficits over the next ten years. it will be part of a conversation all of the way through election season and democrats and republicans entrenched forcing the s&p point

that washington can't get on the same page with a massive way to reduce deficit. >> i was so shocked the administration didn't see this coming and in fact tim geithner told us it wasn't going to happen. listen to this. >> is there a risk the united states could lose the aaa credit rating? >> no risk of that. if you listen carefully you the leadership of the united states of america the president and the democrats, recognizing now this is the right thing to do for the economy we have to put into place now reforms that bring down our l long-term deficits a that's an important recognition by people and we would like to put them in place as soon as we can. >> standard & poors is wrong united states will keep the aaa credit rating?

oo absolutely. >> liz you know s&p how can the treasury secretary get this so wrong? isn't it h their -- his job. >> 1.3 chance of a downgrade. fannie mae, freddie mac federal home of bank systems and farm credit system. that to my minds fanny and tr d freddie are in the u.s.'s balance sheet. those as government entities. i don't understand why the white house and treasury seem to be put on the back heels. hi tell you another news breaking item here. federal reserve officials and treasury and primary dealers on wall street jp morgan chase august 3rd did not think a downgrade was eminent. just this past week they were

saying they didn't think a downgrade was eminent. >> you have tons of clients. did you see this coming or were you blind sided, too? >> i was a bit blien sided. a debt deal went through and we were not in the right path at the same time i did not think s&p would come up and downgrade us. thought they would keep the rhetoric going the u.s. is in trouble going forward. i didn't think we were going to get downgraded. i am actually glad. it is really going to wake up our government. >> here is the other point. he told kneel korede aiyegbusi vut toe yesterday on vaet the u.s. is still a negative outlook 1 in 3 chance we could go to a in two years time. that's why the focus is on the congressional committee. they need to come up with 3.4

trillion in kutsz to get to the s&p 4 trillion command. we have names that might be on the short list. we are hearing there's no confirmation they are on the short list the names rememb we hearing is senator rob portman and ryan and others. >> give us the whole list. this is important. >> this is the crew again the by partisan 12 member committee that has to start deciding by november what been cut to avoid a doub aa. not just 1 and a half trillion, double that 3.1, 3.2 trillion. we are talking about rob portman we have possibly paul ryan. these names are being bandied about. this is what we are hearing. representative alex swarer schwartz a philadelphia main lied modera -- main line modera. van hole len and john kyles senate republican whip. they were on senator bidbiden, e

president biden's commission. >> looking at people who might be on the commission i want to turn to rich for just a second. it seems to me we are picking people deeply entrenched in their point of view. it is just as likely these people will disagree and not be able to come to terms as is the entire congress and senate. do you agree? >> gerri do you hear me? >> yes, i can. >> what we are hearing on the commission paul ryan said on fox news sunday this morning he is not looking for too much out of the super commission. it is only charged with finding 1.5 trillion in savings that could be a mix of tax increases or curves. what you are seeing now ever since this downgrade and before this downgrade is republicans continuing to reskis any type of tax increase. democrats continuing their call to protect entitlement programs.

nancy pelosi will be holding a forum with senior citizens to discuss dem grat's commitment to protecting medicare medicaid and social security. we are at the same stiep of jam we were before this started this doesn't miesh either party to go off of theirs for some type of compromise. it is more entrenched with the downgrade of the s&p. >> paul ryan said don't expect too much from the committee there's not much we can get together on. >> you make an important point of how much we put too much confidence in the aaa rating. there aren't many countries that carry it any more. >> there are still a few aaa's. australia is one of them. believe it or not there are 4 u.s. companies that are still aaa rated they are johnson & johnson, exxon mobil, microsoft

and surprising one to me is adp which is a processing firm. you look at the yields on these as well. the yields have been dropping. they range between 27 and a half and 27.6 percent. what s&p is saying is you investing in microsoft, they are more liquid than the u.s. government. that is kind of scary to think about that. exxon mobil their profits are based on oil. they are going to make money but not as much. they are saying it's safer to buy their debt than it is the u.s. government. that is mind blowing to me. >> that's shocking. i can't even believe we are reporting this story tonight it is so amazing to me. we have another expert katie sarjon. talk to us about those asian markets. anything surprise you here? >> what we are seeing is mid morning in asia we are seeing

mid numbers across the region. they have come och the morning lows nothing like we saw on friday. new zealand was the first market to show how the day might go. it plunged 3.3 at the open but come back a little now down 23 in 3 percent. nikkei and japan down one and a third. still 1.6 percent. hong kong and shanghai trading little over half an hour now. hang seng under performing the region. it is down more than 3 percent at the start. composite index is down about 1 percent. so i think the surprise is that it is not worse than it is. we are seeing lots of numbers. we still have a lot of trading to go in the days today gerri. >> what are people talking about traders? investment advisors. are they thinking we are over playing it? it is not that important or do they just expect it to happen?

>> some of it has been priced in. a lot of it the downgrade was well telegraphed. when it happened people knew it was going to happen. some of it has been priced in. we did give it a vote of confidence to some extent from japan's finance minister saying the confidence is unshaken. japan the second largest holder in u.s. treasuries than china. they have faith in the u.s. bond market and they are not looking to move out of that any time soon. people are looking at it. they are waiting to see some of the fundamentals of some of the stocks here that we have had quarterly reports on some of the japanese companies as they have been reporting. that has been showing some recovery from the disasters they have had in march. there are other things to look at as well. >> it is not all about us necessarily. >> well it's a lot about you. we don't want to down-play it too much. but there are certainly other things to be looking at here in the region. >> thank you so much.

matt, liz, sandra, rich and katie thank you so much. we will get more reaction from our nation's lawmakers who have to solve the country's debt crisis. joe walsh coming up after the break. vrrooom...vrrroooomm

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my morning commute was by canoe. after two months i was ready to quit, but after two years, i didn't want to leave. i didn't know i had it in me. turn two years of service into a lifetime of experience. to all the peace corps volunteers past, present, and future, thank you for your service to your country and the world. >> welcome back. world markets in turmoil after the stunning downgrade by ss&p. liz macdonald with me now. smith in the fox newsroom and congress nan joe walsh in illinois one of 22 repaub crepu who voted against raidsing the debt ceiling. great to have you. >> thank you. great to be with you. >> do you look back at that no vote and think it was a mistake or right thing to do?

>> gosh, no, i look back at the no vote and i think thank god we made that vote. the credit agencies told us all of them before that vote a week or two before even if we don't raise the debt ceiling if we don't make the extendsing put and don't act spending reform they were likely to downgrade anyways. this is not a surprise to us. we are downgraded because the fiscal situation we are in and all of these trouble some house republicans like myself thank god we have been here because we would have raised the debt ceiling who knows how much and still spending so much money. so look, this is to meet salvage debt crisis. >> maybe they will be forced to now. want to get you to respond to

something the president eights advisor david axle rod said. he said we should call this the tea party downgrade. do you agree? >> iveng tsz so funny almost comical how by the textbook these guys are the administration you have seen senator john kerry say don't give the tea party equal time. senator nelson. they are all on the same talk pi point. what they are trying to do is blame the fiscal financial situation this country is in these house republicans who came here who were sent here. shame on them. this president and this administration i am at the point where they are bu bankrupting t country and we have done our best to pull us back from that. >> you called the tea parties critics embarrassing and out of touch. do you think you have the american people with you? some of the polling that we have seen of u.s. voters there are

questions about tea party as well. do you think you are gaining strength or losing strength? >> oh, yeah, i think most americans understand when the credit agencies began to warn us last spring about a potential downgrade, we have had nothing to do with the august 2nd deadline. it had to do with the fact that we were in a mutual crisis. we had to control our debt. american people understand that. i think they appreciate all that the house republicans have tried to do to point us in that direction. and then when the administration and all of these other democrats began to insult the tea party i think they are insulting other americans and it's just not going to work. >> judge hangars heads s&p said there could be another

downgrade. >> the negative outlook speaks to a 6-24 month time frame. the administration is looking for additional measures on top of the 2.1 to 2.4 trillion we have with this current agreement the budget control act of 20011 the time frame is 6 months to 24 months the definition is at least a 1 in 3 probability. >> let me turn to you. you see that commentary you think holy cow it could get worse. >> it could get worse. what he is saying a aa as early as february when he said 6 months to 24 months they are sticking fast to the 4 trillion in cuts. that's why i think the pressure is on the super committee to come up with it. that is a question mark right if they do. >> interesting question to the congressman, will you guys open back up the conversation on budgets and budget cuts? i know we have this special

committee going on. supposed to happen soon october. that may not be fast enough. >> you know what? we have to. i will tell you guys what the house voted on two, three weeks ago cap and balance what we voted for real cuts and voted for balanced budget amendment. that is the reform. that is reform the credit agencies told us past their criteria. we have got to get serious about spending cuts and get serious about spending reform. too much of washington don't understand that. >> you got that right. congressman thank you so much for being with us. liz, matt appreciate your help so much. thank you. coming up what exactly is the u.s. credit rating and how does it effect your ability to buy a home, car or even grow your business? i will break it down next. stay with fox business giving

you tell the power to prosper.

>> welcome back. we are monitoring stock markets as they open in asia. for that we are going to candice smith. >> we continue to see heavy selling in the markets overseas. hang seng down. we continue to watch those. our markets indicate we could see heavy selling when we come in in the morning. futures off the lows of the session. still the dow futures is down more than 200 points. nasdaq and s&p as you can see also down by nearly 2 percent. taking a look at some of the commodities and their reaction

aaa downgraded. we are seeing oil flunging. it is down nearly 3 percent. that's down more than a $2 drop. we are at $84 in change. investors continue to flock from. you are looking at all tomb highs of gold there. shy of 1700 an ounce. silver up more than 5 percent. it's topping $40 an ounce. we are also looking at a week that will hold the fed two-day meeting. we l the meeting that comes on tuesday these markets will focus on. >> many many things to keep an eye on. just as you have a credit rating so does the federal government and it's not looking good. uncle sam's credit rating got dropped from 20 percent friday. they may suffer some of the same problems you and i do as they lose credibility.

likely become more expensive for the federal government to do business as they demand more in interest. this will have an effect throughout the wholly con me ee cross the board. you could be paying more for a car loan mortgage loan a student loan or a loan for your small business. good news is rates are at historic low levels right now. if you can't qualify for a loan the rates are drastic. this suspect going to be pretty. especially in the short term. hang on ultimately the impact could be positive if washington heeds the call and gets serious about getting our debt under control getting our country back on track on growing expanding and creating. up next we will ask experts one simple question. what does it mean for your investment. and the big political question

tonight what does it all mean for the obama administration. the answer is coming up next. ♪

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>> the big question all of us are asked what is the s&p downgrade of treasury debt mean for my money? managing director of cap wood investments and roiters economic correspondent. welcome to you both. >> thank you. >> thank you. >> andrea i am going to start with you. you have been talking with investors about possible ripple effects. >> the initial reaction we got is this is why we telegraph it has already been priced into the market. we really don't need to worry about it all that much. but as the weekend progressed and the tension built around the

asian markets open i think you have a lot of people worried about the possible ripple effects on things like municipal bond markets fanny way and freddie mac bonds. anything that could be downgraded with the association of the tax credit. >> you are watching these markets all of the time on behalf of your clients. are they worried about this? what about the knock on the backside and other kinds of debt? >> well there is certainly a lot of tension. people are calling me on the weekend. they haven't called me on the weekend for years and years. people are anxious about this. what i am telling them is simple there is nothing they need to do tomorrow morning. this will be a long-term problem but it has already been phased in fig quite a bit. people knew it was coming but tomorrow morning we are going to see things go up and down all over the place. i am going to encourage

everybody including my clients to do nothing. stocks are 20 percent under valued based on next year's expected earnings. that's a fact. earnings don't match up we are encouraging people to buy now stocks are cheap. >> you lock in your losses that's for darned sure. i think there's sort of a purple storm coming lots of bad news a lot coming together a lot of news tomorrow morning. s&p has a conference call on tuesday federal reserve meets. gdp mo puny. all of this is coming together. >> don't forget europe. >> oh, wow. that is something we have completely egg anothered really. do you see this as the perfect

storm? oo you hit on an important point which is jobs. one of the problems with focusing the discussion solely on the deficit is we ignore a gaping emergency we have right now which is 14 pl million plus americans without a job. there is such a thing as a stratd gee is encompasses long-term debt reduction to short term stimulus that many would advocate that might get the economy going in a way that is beneficial to the debt. the more mroint you have the more tax deficits you get. >> that's a good point. we have a question on twitter on this same theme penny asked this will this make it harder for ball businesses to get loans to hire or will more layoffs

happen? your thoughts? >> if it continues down the path that we are going it will be harder. right now this is a very minor down set. if that happens and it gets higher it could be a ripple effect. i appreciate all of the bad news that's out there is stock earnings. we are not going to see a major impact on earnings. we are going to see program trading but hysteria is overwhelming. the value is based on earnings that's the only thing they are valued at. a lot of these things effect earning. we are not going to see that over the next 3-6 months. >> gerri if i could add an interesting twist to the plot. we talked about the downgrade raising borrowing costs. there's a good chance it will do so in the long run but in the short run even in the runup to

the downgrade and talk of the downgrade treasury has been falling rapidly as the market rallies because of the economic weakness we are seeing. you could get a perverse short term effect where you get a lowering cost. that is the privilege they may not have long if the other rating agencies for instance follow suit and downgrade the u.s. as well. >> we have to leave it there. fascinating stuff. thank you so much for helping us out tonight. >> thank you. >> when we come back the blame game. market opening tomorrow what will it mean for the obama administration. will the president bear the blame for losing the aaa credit rating. political panel sounds off next. flush [ rge ] psst.

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>> we are live as stocks open. >> we are over the halfway mark in asian trading. havening sang dropped to the lowest levels in over a year. we are looking at right now 619 point drop there. about a 3 percent loss. across the board the nikkei in

japan still down more than a percent. real quick taking a look at sucht futures taking a look at what we are going to see when we come in and see the opening of trading in the morning. dow futures are down 225 points. considering fair value we could see a 215 point drop when markets open in the morning. something to consider as we make our way through the morning. >> the finger pointing continues. top advisor says obama puts the blame on the tea party. john mccain says the fault lies with the president. >> there is dysfunction in our system. a lot has to do with the president's decision not to leave. the senate and presidency are controlled the dem kratsz. the fact is the president never

came fore woord with a plan. i was gratified to hear he had plans but there was never a specific plan. >> joining me now is ron christie in san francisco and brad blakeman and democratic strategist doug shun. glad to have you all here. we haven't sack tackled the pol issue. >> i think john mccain is absolutely right. the president is the president of our country. he showed a lack of leadership. we see a president who loves the job but doesn't like the work. we have seen jobs in the economy as well as vice president and foreign affairs with hillary clinton. america needs leadership. it is easy to be a politician hard to be a statesman now we need state people. >> everybody is blaming the

president tonight isn't it congress that got us into the financial mess? they are the ones who signed his checks. >> while there have been plenty of people who have questioned the basis for s&p's situation their rational was largely political. if you look at what john mccain said and axle rod said the blame game continues there are no plans put forward i can hear to get us out of this mess that have no hope in achieving this. >> you bring up david axle rod. let's listen to what he had to say. >> let's look at the history of this. the fact of the matter is this is essentially a tea party downgrade. it brought us to the brink of a default. that clearly is on the backs of those who were willing to see the country default. the very strident voices in the

tea party. >> ron christie to you, is it the tea party's fault? were they the folks to blame for bringing us to this blink? >> no of course not f. you look at the fact of the matter is the senate failed utterly to pass the budget. they have not passed a budget in more than two years. it was voted down by the senate 94-0. the house republicans have been very responsible. they passed a budget. if you look at the numbers for deficit reduction it would have cut 4 trillion off and it would not have put us in the population we are now including standard and poors. the president of the united states has failed to lead and put forth a plan to get us out of this mess. the only way we are going to get out of this is to take a look at serious issues of medicare medicaid and democrats are have

been able to do that. >> we are going to deal with a special congress a special super congress coming up soon. are they going to have any more success? >> let's hope so. the bottom line is we have chairmans around a million important -- they are the ones who took these leadership positions. the problem is we have a super committee where 12 people are doing the work that is elected to serve and do this work in the right way. i hope doug you agree with me who agreed to take on this responsibility in the first place. >> this morning on chris wallace's show doesn't expect. do we have a right? >> i think he does have a right. we had the possibility of full simpson which is by partisan support the president did not support it we didn't get the

gang of six playing through the grand bargain didn't get through. you know what? there are no signs we are moving in the right dibs. >> i have to find someone with a good point of view. back to more on the political fallout after a quick raek stay with us on special education of fox business. giving you the power to prosper. [music]

>> sandra smith in the fox business newsroom.

>> if is not the night for 1700 in gold just $5 less -- away from the $1,700 mark. oil heavy trading down near 2 and a half dollar loss there. $84 a barrel. investors continue to sell out of the oil markets. >> we are back with our political panel looking at the wake of the s&p downgrade. i want to ask you about this question wer getting closer and closer to the presidential election. won't it make it more difficult to find common ground? >> i think it will be difficult to find common ground. republican primary voters are opposed to the president.

>> the president you heard is playing the blame game. he doesn't have a plan and he is more interested in one up man ship than he is getting it done. this is coming from a former clinton advisor. >> i wish as someone in the white house working for a balanced budget 95-96>> you think it's bad now wait 13 months. >> a third of the senate and you got the presidency. let's go back to 88. george bush said read my lips no new taxes. he went back on his pledge and he didn't re-elected. now the republicans have to stavendz on principal for what's

right. 2012 will mark a polarization where you will have the ultimate distinction between what republicans stand for and what democrats stands for. >> thank you four coming back with us. can we move forward with the presidential election so close? oo i don't think we are going to address the serious issues with barack obama as president president united states. he held ton to his ideology and not tackle issues taking us in the wrong direction. couple that with hair rei reed who is more interested in playi claiming the blame game. republicans control one-half of the congress i don't see the senate majority leader looking

at any concrete manner. i don't think we are going to get much done in the next 13, 14 months. >> i want you to see something paul ryan said about how we c w would have averted all of this. >> we passed a budget that could have prevented it from happening in the first place. >> it would make the growth go interest gpd. we have a specific plan i balanced the budget restoreform tack would heed spending cut reduction as well as economic growth and job creation. >> he has always had the solution. could you make the ryan plan viable? >> i don't think you can it would sris rate medicare and medicaid.

we have bow simpson a framework that reforms entitlement reforms the tax code, cuts spending puts us on a path to economic recovery. the white house walked away from it it had 11 much 18 votes. it was a good plan then it is now. >> he could be the guy who asked for it then he ignored it. >> the president made a determination when he got elected. he turned his back on the economy and focused on healthcare. la good is affordable healthcare if you don't have a job to pay for it. he we need to take the ryan plan and use that as a tool. >> let's get ron in there. we have the republican strong hold coming up. it has been interesting to watch the republican candidates avoid this whole controversy over the

debt and debt ceiling. do you think we will see leadership out of these folks? will they beable to distinguish themselves in this environment? >> this is a marker in the sand where they say america needs to get the good credit rating back. it was wise for mitt romney to stay on the side lines. injury pub cans now heading into the iowa caucus and new hampshire primary saying this is the difference of how to get us out of this mess and frankly are we better now four years later? that is where it will draw the contrast. >> thank you so much for helping us out tonight.

before we wrap up we wanted to leave you with advice from ed. when the dow opens up atom morning down as much as 200 points what do you a advise sma investors to do? oo not only small investors do you all investors. they are priced based on earnings. second quarter earnings have come in better than we thought. everything will be fine in the market. it is not going to effect them short term or long run. if you have cash on the side make it work. stocks will be higher 3-6 months from now. what do i expect is to end tomorrow 132 points. stocks are going to be fine, markets will go higher.

you have to deal with program trades. >> you look at what's going on with the stocks, their pe's are in the basement. they have been sold off not because they are monday fundamental but for other reasons entirely. are you saying there's time to buy? >> if you were a long-term investor get your money to wo t buy high quality companies not small companies buy companies that pay dividends. gold on to them go to work and make the economy grow. a lot of people who probably see them. at least they weren't sell everything they own. appreciate. that's it for the fox business schedule. wall street will ep tomorrow at 5:00 a.m. eastern time on the

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