Geithner: U.S. Won't Lose Triple-A Bond Rating
WASHINGTON -- Treasury Secretary Timothy Geithner said Sunday that the U.S. wasn't in danger of losing its triple-A bond rating, in the wake of a warning from Moody's Investors Services about the U.S.'s treasury-bond rating.
"Absolutely not," Mr. Geithner said in an interview with ABC News's "This Week" when asked about the prospect of the U.S. losing its top rating. "That will never happen to this country."
Never is a very long time. A lot can happen in an eternity. I would have settled for assurances that we wouldn't lose it in my lifetime. In fact, I would have been tickled pink. This was overkill though. It kind of creeps me out.
Tim? Can I call you that? I have some advice. Perhaps you should stick to your 2005 April Fool's Day plan. It was really working for you.
April 1, 2005
Perspectives on U.S. Monetary Policy
These dimensions of the broader context in which we will be making monetary policy in the years ahead put a very important premium on keeping U.S. monetary policy as close to the frontier of credibility as possible.
Consider moving back just a bit closer to the frontier of credibility. At least put some fine print in there. Might I suggest...
Absolutely not. That will never happen to this country.*
* We will not lose our AAA credit rating in my lifetime, as long as we don't do the same stupid things we continue to do and it isn't already too late to fix our problems.
I'm not trying to give you a hard time though. Like Immelt once did, you are doing all you can to protect our AAA credit rating.
December 16, 2008
GE Stops Giving Quarterly Earnings Guidance
Still, Immelt did reaffirm GE’s 2008 guidance, along with the company’s commitment to its 2009 dividend and to doing what’s needed to maintain its AAA credit rating.
Check out this commitment to its 2009 dividend. It seems GE also strayed from the frontier of credibility.
February 27, 2009
GE Slashes Dividend 68%
For months, Chairman and CEO Jeffrey R. Immelt has promised to manage the company both to preserve its dividend, a handsome yield for the company’s widely held stock, and to maintain its AAA credit rating, which gives it lower borrowing costs for its GE Capital unit.
Check out GE's promise to maintain its AAA credit rating.
March 12, 2009
General Electric loses top credit rating
"We will continue to run GE with the disciplines of a Triple-A company," Immelt said in a statement Thursday.
Had they ran GE with the disciplines of a Triple-A company, then GE would still be Triple-A. Just a hunch. Unfortunately, once you breach the frontier of credibility there's just no going back apparently. One breach begets another, and so on. As Shakespeare once said...
Once more unto the breach, dear friends, once more;
Or close the wall up with our English dead.
March 15, 2005
As company priorities shift, fewer get AAA debt rating
The AAA-rated company is an increasingly endangered species.
...
If AIG falls off the list of AAA companies, it will be the latest dropout in what's been a drastic trend since the 1980s of companies losing their top-notch ratings. A debt rating of AAA is the gold standard — the cleanest bill of financial health — and means a company can borrow money at lower interest rates than those with less pristine credit ratings.
AIG did fall off the list. It was not exactly a soft landing either.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
-
At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
14 hours ago
9 comments:
Stag,
Credibility? I don't think that word means what you think it means.
Geithner:
I'm not a regulator. Not paying my taxes was an honest mistake.
When Paulson, Bernanke and I stated that an AIG failure would have left millions of insurance policy holders without insurance coverage, we were unaware that ALL 50 U.S. States have "State Insurance Guaranty Funds".
Joking aside, as a former busness owner, I've been involved with a failed insurance company before. In the event of an insurance company failure, the State Guaranty Fund steps in and your coverage is basically seemless. State Guaranty funds provide a bridge until you secure a new provider.
Imo, the AIG timeline is critical to understanding what transpired. As I see it, the Government bailout of the banking system and more recently Fannie and Freddie was/is also a bailout of the Fed itself.
The Fed gave AIG an $85 billion bailout in September 2008. There was no Government involvement during the Fed's initial Sept. 2008AIG bailout. In exchange for the $85 billion, the Fed got 79.9% ownership of AIG via warrants. However, AIG likely had a negative net worth and an $85 billion loss would have more than wiped out the Fed's ~ $50 billion in capital. Good luck strong arming Goldman and the other AIG counterparties - Hey, if we go down, you go down too!
In November of 2008, AIG became a ward of the U.S. Treasury, not just a liability of the Federal Reserve. Why? To bailout the Fed imo.
In September of 2008, Geithner and the Fed paniced. They jumped the gun and potentially bankrupted the Fed by bailing out AIG. When they realized they had no collateral for their $85 billion, they went and got themselves a U.S. Government bailout. Unfreaking believable. They needed the Treasury's involvement in order to make AIG's collateral somewhat legitimate.
The Treasury's 2009 Xmas Eve announcement that the Fannie and Freddie bailouts are now "unlimited" is likely another Fed bailout.
There is no printing of money. It's all debt. Eventually, the ratio of debt to wages encounters the event horizon.
mab,
"Eventually, the ratio of debt to wages encounters the event horizon."
The "black hole" is very hungry.
Another incredible comment Mab.
Your insight and the ability to explain it is remarkable.
I had discussed this many time, a possible "Debt Chandrasekhar Limit" and maybe we will finally get an answer to that.
Oh yeah,
SAINTS WIN!!!!!!!!!!!!!!!
watchtower,
I consider myself blessed that the ICPLSR here is very high (Intelligent Comment to Payday Loan SPAM Ratio).
GYSC,
The Saints won? This really surprises me. I had money on Chuck Norris. Damn.
http://answers.yahoo.com/question/index?qid=20100203232726AAECL4V
it is going to be an interesting Super Bowl. Chuck Norris and four 12 year old girls are going to play the Colts and the Saints both. It should be a good game for the first two minutes. After that Chuck will be so far ahead the Colts and Saints will never catch up. Of course by the end of the first quarter the Colts and Saints won't even have 11 players left to take the field, they will have all been sent to the hospital or the morgue.
"When Chuck Norris was born the only crying was done by the doctor; nobody slaps Chuck Norris!"
Yup.
"Chuck Norris can divide by zero."
Stag,
It's all about credibility.
http://finance.yahoo.com/news/Europe-could-face-yearslong-apf-3533258728.html?x=0&sec=topStories&pos=9&asset=&ccode=
From the above link:
Greece's figures -- a budget deficit that rocketed to 12.7 percent of annual economic output in 2009, four times above the EU limit, and a national debt of more than 113 percent of GDP -- have alarmed the country's EU partners and international markets, forcing a spike in borrowing costs for Greece and other weak European economies and pushing down the euro exchange rate.
Good grief! Greece is a mess. A basket case. How did they ever let things get so far out of hand? The "solution" is obvious. Greece needs to credibly hide their public debts "off" balance sheet (or maybe in a trojan horse).
Take debt levels in the U.S for instance.
We have a projected deficit this year of ~ $1.5 trillion or about 10.3% of GDP. That's a shocking 2.4% better than Greece! Very comforting. Lots of room to spare!
How about our total debt to GDP ratio:
Debt held by the public: ~ $7.5T
Debt held by "Trust" funds: ~ $4.5T
Debt of GSE's: ~ $6T!
That's debt of ~ $18 trillion divided by GDP of ~ 14.5T = ~ 125%. Woah, that's worse than Greece! What gives?
Just kidding. No worries. It's all about presentation and object permanence. You see, if debt is "off" balance sheet" it doesn't make any noise? The GSE debt and the "trust" fund debt is not officially guaranteed. It's "off" balance sheet.
Looked at this way, one can see just how important "off" balance sheet entities and financial innovation really are. And despite the eCONomic crisis, we have to be careful. Financial reform is a "Greeced" slope. Very slippery.
Oooh, I almost forgot. Another key to credibility is to perpetually ignore promised but completely unfunded future benefits (aka liabilities). Like the tens of trillions in medicare benefits that will never be money good. Arguably, "no"-accounting is even more important than "off" balance sheet accounting.
mab,
"Take debt levels in the U.S for instance."
I'm sorry. I can't take them. There's no room in my budget. You take them or find someone else! Please. I'm begging you here.
"Another key to credibility is to perpetually ignore promised but completely unfunded future benefits (aka liabilities)."
The key is to promise verbally but back it up with hard concrete written disclaimers.
I refer you to my latest Social Security Statement.
Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 78 percent of scheduled benefits.
See! No promises! We're in fantastic shape. Sigh.
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