S&P: No Regrets on Downgrade

Aug 8, 2011 8:34am

The head of the Standard & Poor's government debt rating unit told me he "absolutely" does not have second thoughts on downgrading the U.S. to a AA+ rating despite a barrage of criticism over the weekend. And when I asked David Beers about the continued blood bath in the financial markets and if S&P is to blame he struck back.

“Well I think that’s a gross exaggeration actually. You saw that the markets were quite turbulent all through last week,” he told me.

A public spat broke out between the administration and S&P over the weekend and Tim Geithner said the ratings agency showed “really terrible judgment and they've handled themselves very poorly.”

But based on Geithner’s remarks to CNBC Beers believes the Treasury Secretary actually agrees with S&P’s analysis.

“He acknowledged the damage that was done to the U.S. reputation because of the controversy over the debt ceiling and the fact that it took to last Tuesday to get an agreement, the very day that the Treasury was warning it would have cash flow difficulties and difficulty honoring its debt,” Beers said. “He also acknowledged that the underlying public finances of the US government are on an unsustainable path.”

“So we have this paradox here where the Treasury Secretary seems to agree with the thrust of our analysis, he just rejects [our rating],” Beers told me.

Following the downgrade the administration was quick to point out S&P’s error that it miscalculated the government’s 10 year debt by $2 trillion. But Beers flat out rejected the “characterization by the Treasury about an error.”

“These are about long term projections, they are about highly technical assumptions related to Congressional Budget Office base lines about debt growth now and in the future,” he said. “So under our current projections, for example, the way we measure net public debt in the US. This year the debt is going to be about $11 trillion. We’re projecting it’s going to about $15 trillion in 2015 and we expect it to exceed $20 trillion in 2021.”

Watch the interview here:

George Stephanopoulos

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