But it also had higher financing costs of $877 million, against $485 million the year before.

Higher financing costs will force lawmakers to make deeper budget cuts, or issue more bonds.

It is traditional to include the financing cost in such levelised calculations.

Merrill officials said they did not believe the downgradings would have a significant effect on the firm's financing costs.

Quietly stick up your prices to pay for the extra financing cost.

"As the Treasury finances short term, its financing costs are more variable," he said.

Analysts said the threat of higher financing costs pushed many fence-sitters into the market.

An adverse reaction to the data would send interest rates higher and push up the Treasury's financing costs.

Lower rates would also cut corporate financing costs and thus push earnings higher.

Banking groups said they viewed the proposal primarily as an increase in their financing costs.