My favorite part of this is a DOJ official wondering why no one had made this allegation publicly until now, more than two and a half years after it supposedly happened. Any theories on why a business that had already been threatened by a cabinet member but couldn’t prove it might want to keep mum lest it piss him off further? How many minor or major threats are government officials involved in daily, do you suppose, and how many get reported? (Timothy Carney cites a few examples from Hopenchange’s first term in his post about this.) Sometimes they don’t even bother to hide it: Remember, one of the reasons HHS was able to “convince” insurance companies to start moving ObamaCare deadlines around is because Sebelius threatened to boot companies from the exchanges next year if they didn’t comply. When you can strong-arm private industry in public, without fear of reprisal, that’s when you know you’re on the road to a de facto, if not de jure, government takeover.
Not all cabinet officers are so lucky, though, so some have to resort to this:
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 crisis.
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.”
There was in fact an error — a $2 trillion one — in S&P’s calculations related to the downgrade, but the company swore afterward that it didn’t affect their decision to drop the U.S. from AAA to AA+. Meanwhile, a few days after Geithner’s phone call, news broke about the SEC launching a preliminary investigation of S&P for insider trading related to the downgrade assessment. Geithner himself was scathing about the company when he addressed the downgrade publicly. Now they’re being sued by the feds for fraud. Maybe those things are unrelated or maybe not — even S&P probably doesn’t know for sure — but this is why scrupulous government officials tend not to dial up antagonists to warn them they’re being “looked at.” Given the power they wield, it’s easy to draw the wrong conclusion about retaliation even if it’s not intended. You don’t suppose a mellow, easygoing guy like Tim Geithner intended it, do you?
By the way, it was the first debt-ceiling standoff between the parties in 2011 that helped trigger that downgrade. According to Jack Lew’s letter to Boehner today, the next standoff is coming next month. I wonder if S&P’s learned its lesson.