Standard and Poor's does not think the United States will default on its debt, the rating agency's president Deven Sharma said on Wednesday.
"Our analysts don't believe they would," Sharma told a House of Representatives Financial Services committee hearing held to examine oversight of the credit rating agencies.
Sharma's comments come as the Obama administration and lawmakers race to craft a plan to raise the country's debt cap before Aug. 2 when the U.S. Treasury will no longer be able borrow more funds to pay government bills.
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Sharma says that some of the deficit-cutting plans being considered by Congress could bring the U.S. debt burden down to a level that would allow the country to keep its triple-A credit rating.
Sharma told the congressional panel that previous reports indicating that Congress would need to achieve $4 trillion in deficit cuts over 10 years to retain the country's top credit rating were inaccurate.
Sharma refused to be specific over how much deficit cutting would be needed to win S&P's approval. But he said some of the plans being discussed were in the range of what the credit agency believes would be necessary for a credible attack on the country's deficit problems.
The three major credit rating agencies — Moody's, Standard & Poor's and Fitch Ratings — have all issued warnings that they may downgrade the U.S. government's current triple-A credit rating.
Such a downgrade could send shockwaves through the financial system. The federal government has had the highest credit rating for nearly a century, a rating that has allowed the United States to get the lowest interest rates possible to finance Treasury debt.
The major credit rating agencies have warned that they could lower their top ratings on Treasury debt unless Congress and the Obama administration come up with a credible plan to reduce future deficits as part of the effort to raise the current $14.3 trillion borrowing limit.
Treasury Secretary Timothy Geithner has said he will run out of maneuvering room to keep below the current limit after Aug. 2.
Sharma and Michael Rowan, managing director of Moody's Investors Service, both appeared before the oversight subcommittee of the House Financial Services Committee where they faced questions about the warnings they have issued on the U.S. credit rating.
Sharma told the panel that "there has to be a credible plan" to reduce the U.S. debt burden.
He said that some of the plans that have been put forward would qualify as credible, but he said the agency's credit rating analysts would not make a decision on a possible downgrade until all the details of a final plan were known.
He suggested in response to questions from Rep. Scott Garrett, R-N.J., that some level of deficit reduction below $4 trillion over a decade could qualify. But he refused to be more specific. He said that reports that S&P would only view a $4 trillion deficit cutting plan as credible had not been accurate.
Rowan said while Moody's had issued a warning that there was a risk the agency would downgrade the U.S. debt, the agency was still reviewing the efforts being made by Washington policymakers to deal with the problem.
Sharma was questioned about what contacts his agency had with Geithner and others in the administration before it issued its initial downgrade warning in April.
He told the panel that officials at the agency had allowed Treasury officials to review a draft of the S&P press release warning before it was issued. He said that was done to make sure that there were no inaccuracies in the press release and that this was standard S&P practice and did not involve any special favors for the U.S. government.
Rep. Randy Neugebauer, R-Texas, and chairman of the House subcommittee, said the panel wanted to make sure the rating agencies were not being unduly influenced in the decisions they were making on debt quality.
The credit rating agencies came under attack during the 2008 financial crisis for what critics viewed as overly rosy assessments of the credit quality of billions of dollars in securities backed by home mortgages.
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