Geithner warned S&P after downgrade, executive says
http://www.politico.com/story/2014/01/tim-geithner-sp-downgrade-102447.html?hp=f2
An executive with Standard & Poor’s parent company said in a new legal filing that former Treasury Secretary Timothy Geithner warned him that the credit rating firm would be “looked at very carefully” following its decision in 2011 to downgrade the credit rating of the United States.
The legal document was filed as part of a case the Justice Department brought against S&P in February 2013, alleging the company defraudedinvestors in the lead-up to the 2008 financial crisis by giving risky mortgage bonds its highest rating. The company has alleged the suit was brought in retaliation for the downgrade — a claim Justice officials have dismissed.
legal document filed Monday.
McGraw said in his deposition that an angry Geithner said on the call that S&P had made previous mistakes and would be “looked at very carefully.” McGraw added that Geithner told him “you have done an enormous disservice to yourselves and to your country” and that the downgrade had caused real damage to the struggling economy.
“Such behavior could not occur, [Geithner] said, without a response from the government,” McGraw said, according to the deposition.
Geithner, through a spokesperson, denied any threat was made.
”The allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false,” Jenni LeCompte said in an emailed statement. Geithner left Treasury in January 2013.
Justice also dismissed McGraw’s account of the conversation.
“This is the first time this allegation is being made 2½ years after the call purportedly happened,” a DOJ official said, adding that lawyers involved in the case against S&P had no knowledge of Geithner’s alleged comments.
Justice officials have said the investigation into S&P began in November 2009.
The suit brought by Justice claims that S&P knew how flawed the home loans backing the bonds were but rubber-stamped them AAA anyway in order to please banks selling the securities as it tried to gain more market share.
S&P has defended its ratings, noting they were based on the same data and information as other companies and government officials that also concluded that trouble in the housing market would be fleeting.
The legal document was filed as part of a case the Justice Department brought against S&P in February 2013, alleging the company defrauded
S&P downgraded the U.S. credit rating to AA+ from AAA in August 2011 due to its concerns about the political fights surrounding whether to raise the government’s borrowing limit in a timely manner.
Harold McGraw III, CEO of S&P parent company McGraw Hill Financial, said that two days after this announcement, Geithner called and warned him that the ratings firm had made an error in its analysis and that “you are accountable for that,” according to a McGraw said in his deposition that an angry Geithner said on the call that S&P had made previous mistakes and would be “looked at very carefully.” McGraw added that Geithner told him “you have done an enormous disservice to yourselves and to your country” and that the downgrade had caused real damage to the struggling economy.
“Such behavior could not occur, [Geithner] said, without a response from the government,” McGraw said, according to the deposition.
Geithner, through a spokesperson, denied any threat was made.
”The allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false,” Jenni LeCompte said in an emailed statement. Geithner left Treasury in January 2013.
Justice also dismissed McGraw’s account of the conversation.
“This is the first time this allegation is being made 2½ years after the call purportedly happened,” a DOJ official said, adding that lawyers involved in the case against S&P had no knowledge of Geithner’s alleged comments.
Justice officials have said the investigation into S&P began in November 2009.
The suit brought by Justice claims that S&P knew how flawed the home loans backing the bonds were but rubber-stamped them AAA anyway in order to please banks selling the securities as it tried to gain more market share.
S&P has defended its ratings, noting they were based on the same data and information as other companies and government officials that also concluded that trouble in the housing market would be fleeting.
Read more: http://www.politico.com/story/2014/01/tim-geithner-sp-downgrade-102447.html#ixzz2rWwsXweZ
http://www.politico.com/story/2014/01/tim-geithner-sp-downgrade-102447.html?hp=f2
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