The Frontier of Credibility

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.