Jan 21 Former U.S. Treasury Secretary Timothy
Geithner angrily warned the chairman of Standard & Poor's parent
that the rating agency would be held accountable for its 2011
decision to strip the United States of its coveted "triple-A"
rating, a new court filing shows.
Harold McGraw, the chairman of McGraw-Hill Financial Inc
, made the statement in a declaration filed by S&P on
Monday, as it defends against the government's $5 billion fraud
lawsuit over its rating practices prior to the 2008 financial
McGraw said he returned a call from Geithner on Aug. 8,
2011, three days after S&P cut the U.S. credit rating to
"AA-plus," and that Geithner told him "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."
McGraw said he learned of Geithner's concerns from a message
left by a former subordinate at the Federal Reserve Bank of New
York, where Geithner had been president in 2008.
The U.S. Department of Justice, which brought the civil
fraud lawsuit, did not immediately respond to a request for
comment. New York Fed spokesman Jack Gutt declined to comment.
In its lawsuit, the U.S. government 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.
S&P has claimed that the lawsuit was filed in retaliation
for the downgrade, and should be dismissed. Its main rating
agency rivals, Moody's Investors Service and Fitch Ratings, were
U.S. officials have said there was no connection between the
lawsuit and the downgrade.
S&P has said the downgrade was prompted by concern about
Washington's ability to manage the country's debt.
The case is U.S. v. McGraw-Hill Cos et al, U.S. District
Court, Central District of California, No. 13-00779.