In an affidavit filed this week in federal court in the Central District of California, McGraw Hill Chairman and CEO Harold McGraw III describes events in the summer of 2011. On Friday, Aug. 5, S&P stripped the United States of its longtime triple-A credit rating. Mr. McGraw says that on Monday morning Aug. 8, he was told by an official of the Federal Reserve Bank of New York that Mr. Geithner, who had previously run the New York Fed, "was very angry at S&P."
Mr. McGraw says that later that morning Mr. Geithner himself called. Mr. McGraw says that when he returned the call, "Mr. Geithner expressed anger at the downgrade." The two men then argued over whether S&P had made a calculation error, with Mr. McGraw saying that the firm had relied on official statistics from the Congressional Budget Office. According to the affidavit, the Treasury Secretary continued to insist that an error had been made and then told Mr. McGraw: "You are accountable for that."
In his sworn statement Mr. McGraw adds that, "As I reported contemporaneously to my colleagues, [Mr. Geithner] said that 'you have done an enormous disservice to yourselves and to your country', that the U.S. economy was bad and that the downgrade had done real damage. S&P's conduct would be 'looked at very carefully' he said. Such behavior could not occur, he said, without a response from the government."Subsequently, among all the ratings agencies whose faulty bond ratings contributed to the financial meltdown, the U.S. moved in court only against S&P, claiming $5 billion in damages. This is an example of retribution beyond the pale. I mean, by God, I have history with McGraw Hill and S&P. They are unethical. I don't like them, not in the least. But that does not justify abuse of power. Period.