Federal Reserve Board Chairman Ben Bernanke. For the first time in U.S. history, its credit rating has been downgraded, from a AAA to an AA+. UPI/Kevin Dietsch | License Photo
WASHINGTON, Aug. 5 (UPI) -- The bond rating agency Standard & Poor's Friday downgraded U.S. debt from its current triple-A rating to AA+, a move a government official called "amateur."
Citing government officials it did not identify, ABC had reported earlier Friday the administration was preparing for such a move.
S&P said the downgrade reflects its opinion that the debt reduction plan Congress enacted "falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."
"The effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges," S&P said in announcing its decision.
One federal official told ABC News the downgrade would be based in part on confusion associated with the way Congress handled legislation to raise the limit on federal borrowing and a lack of confidence that further deficit reduction can be achieved under the current U.S. political system.
Citing another source it did not identify, ABC said another reason for the move was because the Republicans' refusal to allow a deficit reduction deal to include new revenues.
However, another government official said the White House had told S&P the company's thinking was "based on flawed math and assumptions." And S&P acknowledged "its numbers are wrong."
An administration official told NBC News after the credit rating was lowered, "It's amateur hour at S&P."
Treasury Department officials said the S&P announcement came after Treasury pointed out the rating agency, in a draft of its downgrade announcement, overstated U.S. debt by incorrectly adding $2 trillion to its projection of the debt, The New York Times reported.
The effect of the downgrade was a matter of speculation Friday but the Times noted that a small increase in interest rates on borrowed funds could add tens of billions of dollars to the nation's annual debt repayment.
There is also a possibility that a downgrade of federal debt could lead to downgrades of other government-backed instruments, possibly leading to higher mortgage interest rates.
Rep. Barney Frank, D-Mass.,, the ranking member on the House Financial Services Committee, said on MSNBC the decision was "just a political judgment by a group of incompetents."
"This is the rating agency that took money from people who were selling junk bonds and told other people to buy it," Frank said, accusing S&P of overvaluing private debt while consistently undervaluing public debt."
"They are as responsible for the financial crisis as anybody else," he said. "There is zero chance of (the United States) defaulting."
Moody's Investor Services and Fitch Ratings both said Tuesday they will keep the country's credit rating at triple-A for now, but they said a downgrade is still possible if the U.S. financial situation deteriorates or if promised federal spending cuts don't materialize.
The two credit ratings firms issued their assessments after President Barack Obama signed into law compromise legislation passed by Congress to raise the nation's debt limit and cut its budget deficit.