NEW YORK – Standard & Poor's Ratings Services said Tuesday that it is considering a downgrade of its ratings for Portugal's debt because of the nation's economic woes.
The ratings agency placed Portugal's credit ratings on "CreditWatch" based on concerns about its growth prospects in light of an impending austerity program, and increased risks to the government's creditworthiness.
Portugal is widely considered the next European nation likely to need a bailout. If it does seek help from the European Union, S&P credit analyst Frank Gill said the terms of the deal will be considered in its ratings review.
Also a major consideration will be government actions related to its austerity program, which S&P said will create a drag on the economy. Government policies "have done little to boost labor flexibility and productivity," the agency said. It forecasts the Portuguese economy will shrink by at least 2 percent next year.
In addition, S&P said the large amount of debt held by non-residents increases the government's vulnerability to rising real interest rates. That adds to the country's need for a large amount of external financing and increases the likelihood Portugal will have to seek help from the European Union.
Concerns about the further spread of the debt crisis that has already led to Greece and Ireland getting EU assistance have unsettled world markets. Like Greece and Ireland, Portugal is relatively small, but if the problems spread further, the far larger economies of Spain and Italy could be next.
S&P said the review will take about three months. If Portugal gets help from the EU, or if its economy worsens, the long-term "A-" and short-term "A-2" ratings could be cut, but the agency said they would remain in the investment grade category. If no bailout is needed or the country passes growth-enhancing reforms, Gill said the ratings will be kept at their current levels.
WASHINGTON (Reuters) – The regulator for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) on Tuesday backed mortgage servicers going ahead with foreclosure proceedings even as they negotiate possible loan modifications aimed at keeping struggling borrowers in their homes.
Paperwork issues that arise during the complicated foreclosure process are the responsibility of the mortgage servicers to sort out, said Edward DeMarco, acting director of the Federal Housing Finance Agency.
"The pressure from high volumes of foreclosures working through the system has surfaced fault lines in the foreclosure process that remain the responsibility of management at these companies to identify and fix," DeMarco said in testimony prepared for delivery on Wednesday to the Senate Banking Committee.
WASHINGTON – Congressional leaders have appointed a small bipartisan group of lawmakers to meet with Obama administration officials to negotiate a deal to extend Bush-era tax cuts that expire at the end of the year.
But even as negotiators meet, the House could go ahead with a planned vote on Thursday to extend the middle-class tax cuts, letting tax cuts for the wealthy expire, said Rep. Chris Van Hollen of Maryland, who will negotiate on behalf of House Democrats.
"Things can change around here, but the hope would be to try and get something by Thursday," Van Hollen said.
Four lawmakers, a Democrat and a Republican from both the House and Senate, are to hold a series of meetings with Treasury Secretary Timothy Geithner and White House Budget Director Jacob Lew.
President Barack Obama and Democratic leaders in Congress want to extend tax cuts for middle- and lower-income taxpayers, while Republicans want to extend them for everyone.
Congressional leaders from both parties met with Obama at the White House on Tuesday to jump-start discussions on taxes and other issues.
Republicans said their goal is to make sure no one gets a tax increase at the start of the year. House Speaker Nancy Pelosi said her goal is to protect middle-class taxpayers.
Democrats in Congress will be represented by Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, and Van Hollen, a member of Pelosi's leadership team.
Republicans will be represented by Sen. Jon Kyl of Arizona, the GOP whip, and Rep. Dave Camp of Michigan, the top Republican on the House Ways and Means Committee.