Apr 21, 2011 3:49 PM GMT
The Obama administration privately urged Standard & Poor’s in recent weeks not to lower its outlook on the United States — a suggestion the ratings agency ignored Monday, two people familiar with the matter said.
Treasury Department officials had been discussing with S&P whether the ratings agency should change its outlook on the United States to “negative” from “stable,” an indication that the country could lose its crucial AAA rating in coming years over its soaring debt levels.
Treasury officials told S&P analysts that they were underestimating the ability of politicians in Washington to fashion a compromise to curb deficits, a Treasury official said. They argued a change in ratings was not needed at this time because the debt was manageable and the administration had a viable plan in the works, the official said.
But S&P analysts told Treasury officials on Friday that they were unmoved — and released a report that expressed skepticism that the political parties could come together on how to bring spending in line with revenue.
Any doubts by credit rating agencies about government debt has the potential to increase borrowing costs for the Treasury.
It is not uncommon for companies and governments to push back when they don’t agree with a decision made by a credit ratings agency. Sometimes, companies that issue debt — which also pay for the ratings — will shop around for the best rating.
But the U.S. government is an unusual case — it doesn’t solicit ratings. S&P and the other major credit rating agencies offer their judgments notwithstanding.
Spokesmen for the Treasury and S&P declined to comment on the record.