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THE CREDIT RATING agency Standard & Poor’s showed “terrible judgment” in lowering the US government’s credit rating, Treasury Secretary Timothy Geithner said yesterday.
“They’ve handled themselves very poorly. And they’ve shown a stunning lack of knowledge about the basic US fiscal budget math,” Geithner said in his first public comments about the credit rating decision.
Interviewed on CNBC, Geither said that US Treasury securities were just as safe now as they were before S&P announced its downgrade. He predicted that China and investors would remain strong purchasers of US government debt.
Republicans have blamed President Barack Obama for the first-ever downgrade of the government’s credit rating.
But Geithner said Congress owns the credit rating because the Constitution gives Congress the power to tax and spend.
Late Friday, S&P announced it was lowering its rating for US debt one notch from AAA to AA+.
The other two major credit rating agencies, Moody’s Investor service and Fitch Ratings, have not lowered their AAA ratings, although they have warned of a possible downgrade if more is not done to deal with soaring federal deficits.
The rating agencies were sharply criticised after the 2008 financial crisis for continuing to give top ratings securities backed by subprime mortgages. When the mortgages went bad, investors lost billions of dollars and the resulting financial crisis sent the country into a deeper recession.
Geithner alluded to those problems in his interview Sunday, saying about the credit agencies: “Look at the quality of judgments they’ve made in the past.”
The administration has also accused S&P of a $2 trillion error in its estimate of the size of the deficits over the next decade because the agency made a fundamental error in interpreting budget projections of the Congressional Budget Office.
“Brinksmanship”
S&P officials say they changed the part of the draft press release where Treasury said it discovered the mistake but that this did not alter their basic assessment.
S&P said the political “brinksmanship” on display in the prolonged battle over the raising the nation’s borrowing limit underscored a deep divide between the political parties that raised concerns over the ability of Congress to come up with a credible plan to deal with the long-term deficit problem.
S&P had been warning for months of a possible downgrade and said that a credible plan would need to achieve $4 trillion in deficit reduction. The plan that Congress passed last week seeks to achieve between $2.1 trillion and $2.4 trillion in deficit cuts.
Geithner refused to forecast whether the credit downgrade would result in higher interest rates for the government, businesses and consumers.
But he said, “I think everyone can be confident around the world, that Treasuries are the … most liquid, the strongest place to put your money at a time like this.”
He said he had “absolutely no concern” that China, the largest foreign holder of US government debt, would stop buying that debt:
They’ve been very strong and I’m sure they’ll be strong investors in the US going forward as will investors around the world.
A critical editorial by China’s state-run news agency on Saturday said that the United States must “cure its addiction to debts.”
- AP
Read more: Downgraded: US loses AAA credit rating for the first time ever >
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What utterel thugs, of the highest order, those hayes brothers are. For me, their blemished family name, hayes, does not warrant a capital letter. Savages.
@Patrice Ahern: the thing that struck me most about that story was the poor victim was an entirely innocent party ….he had no hand,act or part in the shenanigans relating to the young lady then were supposedly being ‘white knights’ for
@Kevvy kerrr: what struck me was the level of violence used against a long time friend, and the threats made to keep his mouth shut when they discovered that they got it wrong – not whether or not the victim in some way “deserved it”
@Kevin Kerr: no, when they had their “eureka” moment nobody thought southdoc or A&E
I’ll pray and light a candle lol
@Paul Mooney: 2 hours, ago you were an athiest. That was a quick conversion.
@Dermot Blaine: I can also play snooker with my right hand, God must have given me this amazing ability
@Paul Mooney: Well done for being able to play snooker, love watching it but can’t play it.
@Brian D’Arcy: I’m not really good though, Brian
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