DEBT DOWNGRADE THREATS

DEAL OR NO DEAL? http://news.yahoo.com/obama-officials-clash-p-over-downgrade-threats-200358261.html

"Beers said S&P disagrees with the Obama administration's belief that it can reach a deal with Congress to shift the country's "debt trajectory."

"If it turns out to be true and we see that ... we would expect to reaffirm the rating," Beers said.

The relationship between the U.S. government and the ratings agencies is complex and difficult.

The agencies came under enormous criticism for giving top ratings to the toxic mortgage-backed securities at the heart of the 2008 financial crisis and have since been threatened with increased regulation by the government.

S&P has taken a different line over the debt and deficit negotiations in Washington than the two other major ratings agencies -- Fitch and Moody's Investors Service.

Fitch and Moody's have threatened downgrades but not shifted the time horizon for when they want to see a deficit deal done and have not issued short-term deadlines.

In the calls to S&P, the Obama administration has stressed there is the political will on both sides to achieve a broad deficit reduction deal and that if one is not struck now, then a package is likely to be agreed in the medium term."