*UPDATE*
CNBC's John Harwood reported that S&P told the federal government at 1:30 p.m. ET Friday that it was preparing to downgrade the country's rating.
But Harwood reported that after U.S. officials pointed out an error in how S&P computed the ratio of U.S. debt to the gross domestic product, S&P decided to reconsider.
A source said S&P's calculations were off by "trillions," CNBC reported.
A source familiar with the discussions said that the Obama administration believes S&P's analysis contained "deep and fundamental flaws."
The rating agencies have been under fire since the financial meltdown of 2008 because they often gave high ratings to bundles of mortgage-related securities that were risky and ultimately failed.
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