The ratings agency Standard and Poor’s is threatening another downgrade of the United States credit rating if the Super Committee doesn’t get results.

It turns out that the Justice Department is not only concerned with Standard and Poor’s but the entire credit rating agency industry, it appears. The reported investigation into the ratings of mortgage backed securities during the housing bubble is centered on S&P, but not limited to them.

A couple days ago, Yves Smith speculated that Standard and Poor’s broke SEC regulations by leaking word of its imminent downgrade of US debt before it occurred. Charlie Gasparino backed her up a day later. And now, the Securities and Exchange Commission is reportedly investigating whether S&P leaked.

The Senate Banking Committee claims to be gathering information on S&P, but as Manns says this is an industry-wide phenomenon. Long ago, the government gave the rating agencies a good deal of power, and now they’re using it to protect their core business. I’d love to see Congress defy the rating agencies and reduce their role in bond deals (through mandating AAA securities in them), but I don’t see it happening.

President Obama plans to produce his own deficit reduction recommendations to a new Super Congress committee tasked with achieving $1.5 trillion in solutions by October, he said in a speech at the White House.

Responding to Standard and Poor’s downgrade of US debt, Obama said that the need for a balanced approach to deficit reduction “was true the day I took office” and remains true today. While not fully agreeing with S&P’s decision, he did say that the gridlock in Washington, cited as a cause of the downgrade, “has not been constructive,” and that the threat of using the debt limit as a leverage point “has now roiled the markets and slowed the pace of recovery.” He did add that the bond markets continue to snap up US debt, and “continue to reaffirm our credit as among the world’s safest.”

If the rating agency’s entire argument was that the political system showed itself to be “less stable, less effective, and less predictable” during the debt limit debate, and that this failure of policymaking and institutional capability increases the chances of default, I don’t have much to argue about that. But, there’s a policy response for that. S&P could do exactly what Moody’s did and call for the debt limit to be extinguished, on the grounds that the legislative branch shouldn’t get to vote twice on funding, once when they appropriate it and another time when they decide whether or not the bill should be paid. If they really wanted to exert some influence on behalf of bondholders, they could have said that they would downgrade US debt further if the debt limit isn’t abolished within 90 days. Since the brinksmanship over the debt limit constitutes the biggest – perhaps the only – threat to paying off US sovereign debt, then the appropriate action for entities judging creditworthiness is to ask that the country in question eliminate the arcane and also dangerous practice.

But that’s not S&P’s only rationale.

Why is Standard and Poors out in front of all the other credit ratings agencies in pointing a gun at the US debt rating? Because a guy named David Beers says so.

It was John Boehner who invoked the spectre of the “Asian markets” by saying that he would deliver a framework deal on how to increase the debt limit by Sunday night. Once you do that, there’s nowhere else to go. If no announcement is made, the Asian markets will most certainly react negatively. If the announcement is seen as unworkable or inadequate, they’ll drop too. This creates rather than arrests a crisis.

After the short White House meeting today, Congressional leaders of both parties met on Capitol Hill to work out an agreement to increase the debt limit. Earlier, House Speaker John Boehner held a conference call with his caucus, where he said he wanted a debt limit plan in place by tomorrow to avoid causing a drop in the Asian markets.

This concern about the markets has happened very suddenly. All of a sudden there’s a belief that a clean increase or a small debt deal with a minor amount of spending cuts would not be enough to avoid a downgrade. Standard and Poor’s basically forced this by saying that they would downgrade if there wasn’t a $4 trillion deficit deal in the next 90 days.

What Mason doesn’t realize is that Galtian producer class colossi work in those corporate boardrooms, and they can shrug off debt ratios like so many gnats. Only the sniveling government – which by the way sucks at the government teat, has anybody noticed that? – has a problem with debt.