S&P Claims Government Lawsuit Is the Retribution Tim Geithner Promised in 2011
In a scandalous new legal filing, an exec at Standard & Poor's parent company claims that former Treasury Secretary Timothy Geithner threatened the S&P in 2011, after the agency downgraded the U.S.'s credit rating. Geithner allegedly promised to look at the credit rating firm "very carefully" after the decision was made. Geithner denies this.
Reuters reports that Harold McGraw, the chairman of S&P's parent company McGraw-Hill Financial, stated in Monday's filing that Geithner spoke to him on the phone three days after S&P downgraded the rating from "AAA" to "AA-plus."
Geithner told [McGraw] "you are accountable" for an alleged "huge error" in S&P's work. "He said that 'you have done an enormous disservice to yourselves and to your country,'" and that S&P's conduct would be "looked at very carefully," McGraw said. "Such behavior could not occur, he said, without a response from the government."
Now, McGraw and S&P are alleging that the "response from the government" is the Justice Department's $5 billion lawsuit against S&P for the agency's role in the 2008 financial crisis. The DOJ has accused S&P of "hurting banks and credit unions by inflating ratings to win more fees from issuers, and then failing to downgrade debt backed by deteriorating mortgage-backed securities fast enough." The DOJ filed the suit in February 2013, and McGraw wants it dismissed.
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Geithner's spokesperson says McGraw's story is bogus: "The allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false." A DOJ official similarly waved away allegations: “This is the first time this allegation is being made 2½ years after the call purportedly happened."
S&P did make an error when calculating the U.S.'s rating in 2011. The Treasury called it a "$2 trillion mistake," because the agency's calculation of the nation's deficit was off by $2.1 trillion. S&P admitted the error but still downgraded the rating, which the Treasury claimed was a political move.
This article was originally published at http://www.thewire.com/politics/2014/01/sp-claims-government-lawsuit-retribution-tim-geithner-promised-2011/357257/
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