Back in 2011 the Obama administration and Treasury Secretary Timothy Geitner were furious that S&P downgraded the U.S. bond rating based on debt and inability to confront through budgetary reforms. A few months after the downgrading announcement the DOJ announced a $5 Billion lawsuit against S&P.
Last week a federal judge, David Carter, ordered the Justice Department to provide documents relevant to S&P’s contention of retaliation.   Not surprisingly this inconvenient legal matter skipped the nightly news cycle.
[Judge] Carter ruled that S&P was entitled to find out whether the administration’s angry reaction to the downgrade contributed to the decision to sue only S&P. The judge cited an August 2011 phone call allegedly placed by then-Treasury Secretary Timothy Geithner to Harold McGraw III, the chairman and chief executive officer of McGraw-Hill, S&P’s parent company.
In a sworn affidavit, McGraw said that Geithner deplored the downgrade as wrongheaded and unpatriotic. Carter said S&P deserved access to documents that might shed light on whether Geithner’s pique, as McGraw has described it, had any connection to the subsequent decision to sue S&P.
The Obama administration and Geithner have denied selectively going after S&P or any other wrongdoing. The Justice Department has repeatedly said that its 2013 suit was based exclusively on evidence showing that S&P knew its ratings were inflated. The department asserts that S&P tried to curry favor with banking clients by pumping up ratings of bonds the banks issued—an accusation S&P denies. Instead, S&P insists that its ratings were merely incompetent, not dishonest.
If S&P can prove a Justice Department revenge plot, that would defuse the government suit and expose administration officials—current and former—to allegations that they, not S&P, committed misconduct. Stay tuned on all that. (link)