August 8, 2011
IT NEVER HAD ANYTHING TO DO WITH ECONOMICS:
Treasury's $2 Trillion Man: David A. Graham on how John Bellows, the interim appointee who caught a $2 trillion error Standard & Poor's made in downgrading the U.S. credit rating, went from writing esoteric papers to blasting the agency's math. (David A. Graham, Aug 7, 2011 , Daily Beast)
It was quick thinking by a little-known Treasury functionary that nearly saved the U.S. credit rating on Friday--but didn't quite.
After Standard and Poor's informed the government of its intention to downgrade the national rating from a pristine AAA to AA+, Treasury officials in Washington huddled to look over the ratings agency's draft press release. It was reportedly John Bellows who noticed within minutes that S&P had made a glaring error that placed its calculations about the U.S. deficit off by about $2.1 trillion.
Treasury Secretary Tim Geithner quickly pushed back at S&P, pointing to the error. The agency acknowledged its mistake, then said it was charging ahead with the ratings change anyway. Later that evening, it officially downgraded American debt.
The tense Friday has cast the spotlight on Bellows, who is the acting assistant secretary for economic policy. After spotting the error, he took to the Treasury Department blog Saturday to blast S&P's decision in dry but biting language. "After Treasury pointed out this error--a basic math error of significant consequence--S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one," he wrote.
The most amusing aspect of the whole kerfuffle is that S&P is essentially trying to punish Washington because, while the system worked, they found the process visually dissatisfying. If we had a nickel for every column that's been written saying that, "the final bill was a good one despite how we got there," we could retire the debt.
Posted by oj at August 8, 2011 7:16 AM