The knives are out! S&P's US downgrade may be probed

The unprecedented downgrade of the US' creditworthiness by ratings agency Standard and Poor's may face a probe by a Senate committee, reports have said.

The US administration has already taken up cudgels against S&P for unleashing mayhem on the world's largest economy by its downgrade action.

Stung by the development, the US Senate's Banking Committee has begun collecting information about the downgrade action informally, but is yet announce an official probe, ABC News reported.

. ..

The report quoted an unnamed aide of the committee as saying that it was looking into the issue and gathering more information.

S&P on Friday announced a downgrade of its long-term sovereign rating for the US from the top-notch 'AAA' level to 'AA+' in the first-ever lowering of America's rating.The downgrade has added to the woes of the US economy, which is already battling fears of slipping into another recession amid mounting debt worries.

The development has triggered mayhem in already weak stock markets in the US and abroad and stocks have dropped to their lowest levels in about two years.

. ..

President Barack Obama on Monday strongly defended the US credit profile and said America will always be an AAA nation, as its economic problems were "eminently solvable".

Speaking for the first time since the downgrade, Obama said he would present his own proposals for overcoming the debt woes in the "coming weeks" and asked the Republicans to accept tax hikes on the most affluent Americans.

"No matter what some agency may say, we have always been and always will be a triple A country," Obama said, arguing that global investors still saw the US economy as one of the safest investment destinations in the world.

. ..

Now everyone's blasting Standard and Poor's. US Treasury Secretary Timothy Geithner has said that by downgrading the credit rating of the United States from AAA to AA+, credit ratings agency Standard and Poor's has shown really terrible judgement and have handled themselves very poorly.

"I think S&P has shown really terrible judgment and they've handled themselves very poorly. And they've shown a stunning lack of knowledge about basic US fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement," Geithner told news channel NBC/CNBC in an exclusive interview.

"They, like many people, looked at this terrible debate we've had over the past few months, should the US default or not, really a remarkable thing for a country like the United States. And that was very damaging," Geithner said.

. . .

"I think it left people to wonder whether this political system was going to be up to the challenges facing the country. It caused a lot of damage and that's going to take a long time to heal that damage," said Geithner, who has decided to stay in the Obama Cabinet a little longer after earlier expressing his intention to leave the post this summer.

"I think if a President asks you to serve, you have to do it. And we have men and women dying to protect the country in Afghanistan. We have unemployment above 9 per cent. Still trying to heal the scars of this crisis. We have a lot of work to do," Geithner said, explaining the reasons for his decision to stay in Cabinet for now.

Geithner argued that despite the downgrade of America's credit rating, US treasuries are as safe as they have always been.

. . .

"The judgement by S&P changed nothing. It added nothing to what people know about this country. Again, there's no risk the US would never meet its obligations. We've got some challenges ahead of us, but we'll be able to work with those challenges. We'll get through this," he said.

Geithner said the US Congress ultimately owns the credit rating of the United States.

They have the power of the purse on the Constitution. "They're going to have a chance now to earn back the confidence of investors around the world. Of course they're going to have to do that.

. . .

"But if you look at this country and you look at this economy, our country is much stronger than Washington. We have a very resilient economy. We're a very strong country. And I have enormous confidence in the basic regenerative capacity of the American economy and the American people," he said.

"We're growing. We're still healing. We're not growing as fast as we'd like, but we have absolutely every capacity to meet our obligations. There is no risk the United States of America would ever not be in a position to meet its obligations," Geithner said.

"But we have a lot of work to do and, you know, when these leaders return from vacation, they're going to have to get back to work in trying to put together the kind of long-term fiscal reforms to demonstrate we can live within our means and take some additional actions to help strengthen this economy," he said.