Rating agency says it was threatened over down grade of US

Bloomberg:

... Geithner told McGraw Hill Financial Inc. (MHFI) Chairman Harold W. McGraw III in 2011 that Standard & Poor’s downgrade of the U.S. debt would be met by a response, S&P said.

S&P filed a declaration by McGraw yesterday in federal court in Santa Ana, California, as part of a request to force the U.S. to hand over potential evidence that the company says will support its claim that the government filed a fraud lawsuit against it last year in retaliation for its downgrade of the U.S. debt two years earlier.

In his court statement, McGraw, 65, said Geithner called him on Aug. 8, 2011, after S&P was the only credit ratings company to downgrade the U.S. debt. Geithner, McGraw said, told him that S&P would be held accountable for the downgrade. Government officials have said the downgrade was based on an error by S&P.

“S&P’s conduct would be looked at very carefully,” Geithner told McGraw according to the filing. “Such behavior would not occur, he said, without a response from the government.”

The Justice Department last year accused S&P of lying about its ratings being free of conflicts of interest and may seek as much as $5 billion in civil penalties for losses to federally insured financial institutions that relied on the company’s investment-grade ratings for mortgage-backed securities and collateralized-debt obligations, or CDOs. The government alleged in its Feb. 4, 2013, complaint that S&P knowingly downplayed the risk on securities before the credit crisis to win business from investment banks seeking the highest possible ratings to help them sell the instruments.
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This is a serious charge from a serious man.  It also seems to reflect the Chicago Way intimidation efforts of this administration.  It should also be noted that the allegations against S&P would have equally applied to the other rating agencies which did not downgrade. That is more evidence that suggest retaliation.  The court should dismiss the government suit and consider sanctions for what looks like a bad faith law suit.