“Geithner Told McGraw US Would Respond to Rating Downgrade, S&P Says” – Bloomberg

Posted on :Jan 21, 2014


January 21,2014

Former U.S. Treasury Secretary Timothy Geithner told McGraw Hill Financial Inc.  Chairman Harold W. McGraw III in 2011 that Standard & Poor’s downgrade of  the U.S. debt would be met by a response, S&P said.
S&P filed a  declaration of McGraw yesterday in federal court in Santa Ana, California, as  part of a request to force the U.S. to hand over potential evidence the company  says will support its claim that the government filed a fraud lawsuit against it  last year in retaliation for its downgrade of the U.S. debt two years  earlier.

In his court statement, McGraw said Geithner called him on Aug.  8, 2011, after S&P was the only credit ratings company to downgrade the U.S.  debt. Geithner, McGraw said, told him that S&P would be held accountable for  the downgrade. Government officials have said the downgrade was based on an  error by S&P.

“S&P’s conduct would be looked at very carefully,”  Geithner told McGraw according to the filing. “Such behavior would not occur, he  said, without a response from the government.”

The Justice Department  last year accused S&P of lying about its ratings being free of conflicts of  interest and may seek as much as $5 billion in civil penalties. The government  alleged in its Feb. 4, 2013, complaint that S&P knowingly downplayed the  risk on securities before the credit crisis to win business from investment  banks seeking the highest possible ratings to help sell the  instruments.

2011 Downgrade
In August 2011, S&P  downgraded the U.S.’s 60-year-running AAA credit rating to AA+ with a negative  outlook.
Natalie Earnest, a spokeswoman for the Treasury Department,  didn’t immediately respond to an e-mail after regular business hours yesterday  seeking comment on S&P’s filing. Justice Department officials have  previously said the lawsuit was unrelated to the downgrade.

In its  request to U.S. District Judge David Carter for an order that the Justice  Department hand over the documents it seeks for its “retaliation defense,”  S&P said the government was initially investigating all three major credit  rating companies, including Moody’s Corp., and focused on S&P exclusively  after the McGraw Hill unit downgraded U.S. debt.

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