New Court Documents Allege Tim Geithner Said Some Pretty Ominous Things to S&P After the 2011 Downgrade

Standard and Poor’s in 2011 stripped the United States of its "triple-A" rating, leading to what appears to be some serious friction between the credit rating agency and the U.S. Treasury Department, according to recent legal filings.

President Obama greets Treasury Secretary Timothy Geithner after the State of the Union address Jan. 24, 2012 (Getty Images)

McGraw Hill Financial Inc., S&P’s parent company, in an affidavit filed this week said former U.S. Treasury Secretary Timothy Geithner “angrily chastised” S&P after the U.S. was downgraded to an “AA-plus” rating.

Court documents allege Geithner at one point warned McGraw Hill Financial chairman Harold McGraw that he would be held "accountable" for a supposed "huge error" on S&P’s part.

“S&P’s conduct would be looked at very carefully,” Geithner allegedly told McGraw three days after the downgrade, according to documents made available to TheBlaze. “Such behavior would not occur…without a response from the government.”

Here’s the exact wording from the court document:

[I]n August 2011, Chief Executive Officer and President of McGraw Hill, Harold McGraw III. Mr. McGraw describes personal communications made to him first on behalf of the Secretary of the Treasury, and then personally by the Secretary himself in the days following the downgrade. The Treasury Secretary angrily chastised S&P for the downgrade, stating that S&P’s conduct would be “looked at very carefully” and that such behavior could not occur without a response from the United States.

[…]

This was followed on Monday by a call to Mr. McGraw from the Secretary of the Treasury, Timothy Geithner, in which Secretary Geithner stated that S&P had made a “huge error” for which it was “accountable.” He said that S&P had done “an enormous disservice to yourselves and your country…”

The affidavit adds that McGraw reportedly learned of Geithner’s initials remarks not from Geithner, but from a former agent at the Federal Reserve Bank of New York – the same Fed bank where the former Treasury Secretary had been president in 2008.

The legal filings this week come in response to a $5 billion civil fraud lawsuit the federal government brought against the credit rating agency shortly after the downgrade.

The federal government alleges in its lawsuit that S&P inflated its ratings so it could win more fees from issuers.  However, S&P maintains that the civil fraud lawsuit is about payback for the downgrade. The affidavit this week is an attempt by S&P to have the federal government turn over documents it hopes will prove this claim.

U.S. officials absolutely deny this charge.

“The allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false,” Jenni LeCompte, a spokeswoman for Geithner, told Businessweek in a statement.

S&P in a statement to TheBlaze defended its decision to file the declaration this week.

“We are simply asking the court to order the government to provide the discovery S&P is entitled to so it can properly defend itself against these meritless claims,” Ed Sweeney, a spokesman for New York-based S&P told TheBlaze in a prepared statement. “S&P reviewed the same subprime mortgage data as the rest of the market including U.S. Government officials who publicly stated that problems in the subprime market appeared to be contained.”

“Additionally, S&P’s ratings on the CDOs in question were substantially the same as those provided by the other rating agencies, yet the government has chosen to charge just S&P,” his statement added.

Sweeney declined to comment any further on the story.

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