As Wall Street credit-rating agencies ganged up on Puerto Rico’s top credit last week, the U.S. government confirmed that it is keeping an eye on the island government’s fiscal situation and is mulling alternatives to help aid the sputtering economy.

Officials said the President’s Task Force on Puerto Rico’s Status, the U.S. Treasury and the President’s Council of Economic Advisers are involved in the analysis, according to several reports.

Talk of a «bailout,» however, is not only premature, but also probably inaccurate, two CARIBBEAN BUSINESS sources said. «Expect less action, rather than more,» one Washington, D.C. source said.

«I am pretty certain that the Treasury and others are, in fact, worried about Puerto Rico and keeping an eye on developments here,» said another financial industry source and former government official. «Going from that to an intervention is a whole different story with huge ramifications in both the political and economic arenas.»

Senate President Eduardo Bhatia told a municipal bond panel in New York on Monday that the U.S. Treasury Department has «heightened interest» in Puerto Rico given the recent bond issues. The White House Task Force on Puerto Rico has been looking at the island economy for the past four years and could make specific proposals, but Bhatia said there is no time frame for any announcement.

Gov. Alejandro García Padilla and other top officials have fl at-out denied speculation about a federal government receivership and said, instead, that they have developed a close working relationship with federal officials and were involved in jointly developing initiatives that would help jumpstart the local economy, which has languished in recession for most of the past seven years.

The effort is an outgrowth of the 2011 report by the President’s Task Force on Puerto Rico, which included detailed recommendations on spurring the island’s economy and improving its fiscal situation.

The administration of President Barack Obama recently announced a $320 million aid package for Detroit, whose bankruptcy last summer roiled municipal bond markets, and sources said similar action for Puerto Rico is possible. That is because the aid, which focuses on infrastructure assistance, stems from existing federal government programs and doesn’t need congressional approval.

Meanwhile, the García Padilla administration pushed ahead with plans to boost the borrowing capacity by $2 billion of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym), despite the hits the credit took last week.

Moody’s Investors Service lowered the outstanding senior sales-tax revenue bonds to A2 ($6.8 billion) and affirmed the A3 rating on Cofina’s outstanding subordinate sales-tax revenue bonds ($9.2 billion), while changing its outlook for all Cofina bonds to negative from stable.

Standard & Poor’s (S&P) revised its outlook on all Cofina bonds to negative from stable and affirmed its double-A-minus rating on Cofina’s senior (first-lien) sales tax revenue bonds and its single-A-plus rating on the first subordinate (second- lien) sales tax revenue bonds outstanding.

Moody’s also reaffirmed its rating on Puerto Rico general-obligation (GO) bonds at a single notch above noninvestment grade, or junk bond, which government officials hailed as a significant achievement.

Cofina bonds are still the best way to borrow for the commonwealth government, with Moody’s ratings putting the bonds at five steps and four steps above a junk bond rating, while S&P ratings are six and five notches above noninvestment grade.

«We are pleased that Moody’s has recognized that the recent fiscal measures will help improve both the sustainability and stability of the commonwealth’s finances,» Treasury Secretary Melba Acosta said.

Moody’s said its downgrade of the Cofina senior lien bonds was driven by the fact that growth in sales tax collections has been significantly constrained by the «persistent and cumulative» effects of Puerto Rico’s weak economy.

«While the commonwealth took extraordinary measures in the past several months to stabilize its fiscal situation, economic recovery prospects remain weak,» Moody’s said.

Moody’s explained that the downgrade was due to its finding the six-rating notch gap between Cofinas and GOs was too wide.

«We are encouraged by Moody’s acknowledgement of the commonwealth’s stable sales-tax collections amid fluctuating economic conditions and enhanced enforcement measures that are expected to significantly reduce noncompliance,» Government Development Bank President José Pagán added.

Moody’s said its affirmation of the GOs at Baa3 with a negative outlook reflects a range of primary rating drivers including $2.5 billion in new revenue initiatives and a major reform of the bulk of the public pension system implemented by the García Padilla administration.

The rating agency cited a number of reasons not to lift the GO rating, including the island’s ongoing seven-year recession, population loss, and «very high» and growing debt levels. The economy is weak and continues to struggle, Moody’s said.

«Economic growth prospects are nascent after seven years of recession and could be further dampened by large revenue increases, which were needed to address the commonwealth’s fiscal crisis,» the report states. «Declining population also creates headwinds for economic recovery, though some negative indicators have been amplified by artificially elevated results in 2012, an election year.»

Moody’s also pointed to reduced liquidity and increased refinancing risk, as the commonwealth substitutes short-term financing for planned long-term financing, as it waits out volatile market conditions.

Moody’s noted that financial performance has been weak, including large structural budget gaps that have led to a persistent reliance on deficit financings and serial debt restructurings to support operations in recent years.

S&P also based its lowered outlook on «declining economic and population trends,» said S&P’s credit analyst David Hitchcock.

If S&P follows through and downgrades the rating on the bonds, it would likely be limited to one notch, reflecting gradual economic trends that have seen steady declines in population and economic gross product, analysts said.

Acosta and Pagán said they are confident they will be able to demonstrate «significant progress on our economic development and fiscal plans.»

The governor was also positive. «I am pleased that Moody’s has recognized that my administration’s recent fiscal measures are helping improve the stability and sustainability of Puerto Rico’s finances,» García Padilla said, adding that the rating agency acknowledged that current negative economic indicators were «amplified» because of «artificially inflated» results in 2012, an election year.

Following Moody’s action, the governor said reforming the teachers pension fund was a top priority, and officials said they would work to cut in half the government’s $820 million deficit.

Meanwhile, hearings were held on legislation to expand the borrowing capacity of Cofina bonds. Government officials are hunting for a rate of 7% or less on Cofina bonds, but have underlined their ample financing options should the market for Puerto Rico paper continue to be stormy.

Acosta said the government needs to refinance $1.223 billion in debts incurred by the previous administration and finance $820 million for the fiscal 2014 budget.

Pagán acknowledged that the Wall Street bond market would no longer finance Puerto Rico’s borrowing to balance its budget.