Shortly after four o’clock on the afternoon of Wednesday, April 13, 2011, U.S. Treasury Secretary Tim Geithner walked down the hallway near his office toward a large conference room facing the building’s interior. He was accompanied by a retinue of counselors and aides. When they arrived in the room—known around Treasury simply as “the large”—four people were seated at a long walnut table on the side near the door. Geithner and his entourage greeted them, then walked around to the far side and took their seats.
The four guests hailed from the credit-rating agency Standard & Poor’s (S&P), an outfit the administration’s economic team, like much of the financial world, held in exceedingly low regard. Long before the financial crisis of 2008, S&P and its fellow rating agencies had been derided on Wall Street as hubs for intellectual mediocrities—the clock-punchers that banks and hedge funds had passed over. Then, during the bubble years, the big banks became expert at duping the agencies into blessing their dodgy mortgage securities. Suffice it to say, Treasury was unimpressed with S&P’s analytical powers.
Geithner spoke to the credit-raters with thinly concealed skepticism. “He did not view these guys as worthy of this kind of meeting,” says one colleague. A few days before, S&P had warned Treasury it intended to downgrade its “outlook” on U.S. bonds, the first step toward withdrawing the triple-A status that essentially stamped them as riskless. But Geithner had no intention of begging them to change their minds. Treasury officials felt that if S&P moved ahead with this decision, the company would only embarrass itself, not the U.S. government. In this vein, Geithner simply informed the visitors that his country’s economic performance had exceeded S&P’s expectations on almost every measure it claimed to care about. As for the one where it lagged—the deficit—Geithner pointed out that the president had proposed cutting it by $4 trillion that very morning.