Obama pal Tim Geithner claims US will never lose AAA rating

.
Geithner has been junk status all along, it's just official now.

4/25/11, "US Treasury Secretary Tim Geithner downgrades his own credibility to junk," Bloomberg, via Economic Times

"FOX Business reporter Peter Barnes began his televised interview with Treasury Secretary Tim Geithner two days ago with this question: "Is there a risk that the United States could lose its AAA credit rating? Yes or no?"

Geithner's response: "No risk of that."

"No risk?" Barnes asked.

"No risk," Geithner said.

It's enough to make you wonder: How could Geithner know this to be true? The short answer is he couldn't .

All you have to do is read the research report Standard & Poor's published on April 18 about its sovereign-credit rating for the US, and you will see it estimated the risk of a downgrade quite succinctly. "We believe there is at least a one-in-three likelihood that we could lower our longterm rating on the US within two years," said S&P , which reduced its outlook on the government's debt to "negative" from "stable ." There you have it: Geithner says the chance of a downgrade is zero. S&P says the odds it will cut its rating might be greater than one out of three. So who are you going to believe? Geithner? Or the people at S&P

• who actually will be deciding what S&P will do about S&P's own rating of US sovereign debt?

It would be one thing to express the view that a downgrade would be unwarranted, or that the chance of it happening is remote. Either of these positions would be defensible. Geithner went beyond that and staked out an absolutist stance that reeks of raw arrogance: There is no risk a rating cut will occur. He left no room for a trace of a possibility, ever.

Battling Barney

The mystery is why Geithner would say such a thing. What's he going to do if S&P or some other rating company winds up disagreeing with him? Send Barney Frank to beat them up? The problem for leaders who make indefensible claims like this one is that, after a while, nobody knows whether to believe anything they say. Just remember all those government officials in Greece, Ireland and Portugal who kept saying their countries didn't need bailouts, long after it became clear they did.

Perhaps Geithner would be well-positioned to make such assessments if he were the only person on the planet with the authority to grade sovereign debt -- and if there were zero risk that he would ever die. Not only is Geithner mortal, he doesn't even work for a nationally recognised statistical rating organisation.

Great Error...

The raters showed they could be corrupted when they put their AAA marks on countless subprime mortgage bonds that quickly turned sour. Unlike the companies that bought those labels, though, the US government didn't solicit S&P's ranking of its debt. Trying to predict with certainty what the raters may do next is a fool's game.

Sure, it's conceivable the government might threaten to strip the raters of their officially recognised franchise as retaliation if they dared to downgrade the US We can only hope this isn't what Geithner had in mind when he made his bold prediction. A move like that would risk a major scandal, and it might not even work.

Unwilling leaders

Nothing the raters say should matter, of course. The markets are well aware the US debt is on its way to surpassing the country's annual gross domestic product, and that

• few leaders in Washington

are willing to get federal spending under control again."...



via Lucianne.com