Geithner Says U.S. Will ‘Never’ Lose Its Top Aaa Debt Rating

Posted by Philip Dru on 2/07/10 • Categorized as China, Economy

Feb. 8 (Bloomberg) — Treasury Secretary Timothy F. Geithner said the U.S. isn’t in danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.

“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”

Geithner said investors around the world turn to U.S. Treasury securities and dollar-denominated assets when they are worried about global stability. That reflects “basic confidence” in the U.S. and its ability to bounce back from the global recession, he said.

Moody’s Investors Service Inc. last week said the U.S. government’s bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.

The Obama administration plans to reduce the budget deficit once the labor market recovers, Geithner said. In the short run, that means focusing on ways to “make sure that this economy is growing again,” he said. The administration says the deficit will shrink over the next four years as more Americans find jobs and the economy expands.

“This is within our capacity to do,” Geithner said.

The Obama administration has proposed additional tax cuts and small-business assistance to create jobs. Geithner and other officials have said it’s too soon to start cutting spending because ending stimulus programs now could derail the recovery.

Recession Risks

Geithner said the risk of a “double dip” recession in the U.S. has declined, especially after a government report last month showed the world’s largest economy grew at a 5.7 percent pace in the fourth quarter of 2009.

“We have much, much lower risk of that today than at any time over the last 12 months or so,” Geithner said. “We are beginning the process of healing.”

Geithner defended the Obama administration’s efforts to help homeowners avoid foreclosure through subsidized mortgage modifications. Asked why few homeowners have so far received permanent reworked loans, the Treasury chief said the administration is “absolutely committed” to following through on its promises.

“For eligible Americans — they’re getting permanent modifications that substantially lower their monthly payment,” he said. “For the average household that translates into hundreds and hundreds of dollars every month for them.”

Geithner taped the interview before heading to Iqaluit, in Canada’s northern territory of Nunavut, for a meeting with finance ministers from the Group of Seven industrial nations. He told ABC that he wasn’t worried that tighter financial regulation would put U.S. banks at an international disadvantage.

“I’m very confident we can make sure that we are working very closely to raise global standards around the world so we have a level playing field,” Geithner said.

To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net;

Last Updated: February 7, 2010 22:14 EST

Bloomberg | Rebecca Christie | Sun, Feb 7, 2010

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