Image by AFP via @daylife  Treasury Secretary Tim Geithner took to financial television Tuesday morning to respond to S&P’s move Monday to lower its outlook on the U.S. debt rating to negative, a signal that a downgrade of America’s sterling AAA credit rating could be on the table.  Forbes contributor Peter Schiff, among many others, viewed S&P’s from the standpoint of “tell me something I don’t know,” since the deficit and budgetary challenges facing the U.S. are well-documented at this point.  Geithner seemed to take that same perspective in an interview with Bloomberg Television Tuesday, when he said that despite the S&P move he has “absolutely not” had to reassure any foreign buyers of Treasury securities of the credit worthiness of the U.S. government. As Geithner told Bloomberg’s Peter Cook (video below):  Look at the price at which we borrow. There is a lot of confidence. and that confidence is justified that America is getting stronger….We have to make sure we take on these challenges and start to address them. We have to earn that confidence every day.  Much has been made dating back to the bank bailouts and federal stimulus package about what will happen if big lenders like China stop buying Treasuries. Judging by the rates on the 10-year note – actually below where it was when S&P revised its outlook at less than 3.36% — that is not yet happening.  Geithner was not fully sanguine about the state of the federal finances though, acknowledging S&P’s notion that tough compromises need to be made on Capitol Hill to wrangle control of government coffers and meet multi-year targets on saving and deficit reduction.  While the progression from a negative outlook to a rating cut is hardly immediate, it is interesting to ponder what a loss of the U.S. government’s AAA rating would mean for other borrowers. In September, RBS’ Rich Tang, head of the firm’s fixed-income sales in the Americas, suggested to me that it would be inconsistent to downgrade the U.S. without then extending that cut to municipalities or corporate bonds that are taxed or regulated by the federal government. (See “Rating Agencies Walk Credibility Tightrope.”)  With that in mind, could S&P’s decision to alter its outlook on credit worthiness of the U.S. be followed by an examination of its view on AAA-rated S&P 500 companies Johnson & Johnson, Automatic Data Processing, Exxon Mobil and Microsoft?  A request for comment on that issue to S&P has not yet been returned.  Follow Exile On Wall Street, or Twitter @SchaeferStreet.
U.S. treasury secretary says he has not had to reassure foreign buyers that American debt is still sound.