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
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.