AUGUST 5, 2011, 7:41 PM ET
U.S. Debt Rating in Limbo as Treasury Finds Math Mistake by S&P in Downgrade Warning
By Damian Paletta
A mathematical error discovered late Friday by Treasury Department officials has thrown into limbo — at least temporarily — plans by ratings firm Standard & Poor’s to downgrade the top-notch AAA credit rating the U.S. has held for 70 years, people familiar with the matter said.
The wild back and forth between the Treasury Department and S&P Friday afternoon illustrated the dramatic stakes at play as the rating firm moved to downgrade U.S. debt for the first time in 70 years.
As of early Friday evening, S&P officials still had not decided how to proceed and could move forward with a downgrade despite the issues raised by the White House, people familiar with the matter said.
S&P officials notified the Treasury Department early Friday afternoon it was planning to downgrade the U.S. government’s debt from the AAA rating it has held for decades, a government official said, and it presented its report to the White House. S&P has previously warned such a downgrade might come if Washington didn’t move to comprehensively tackle its long-term fiscal woes.
After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.
S&P officials later called administration officials to say they agreed with the administration’s critique, though they did not say whether it would affect their rating. White House officials remained waiting Friday evening to see what the company would do.
An S&P spokesman didn’t return repeated calls for comment.
http://blogs.wsj.com/marketbeat/2011...grade-warning/
U.S. Debt Rating in Limbo
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