MADDOW:
Again, the breaking news this evening that the
Standard & Poor
's
rating agency
has
for the first time
in
U.S. history
downgraded the American
credit rating
from
AAA
to
AA
-plus. This has never happened before in the
United States
. Joining us now to understand some of the
political reaction
to this is
CNBC
's chief
Washington
correspondent
John Harwood
. He's also a
political
writer for "
The New York Times
."
John
, I know you've been reporting furiously on this all night. Thanks for being here.
JOHN HARWOOD, CNBC:
Sure.
MADDOW:
What are you hearing from the
White House
, from
Treasury
?
HARWOOD:
The White House
isn't saying anything.
A Treasury
spokesman put out the statement that a judgment based on a $2 trillion computation error speaks for itself. I talked to another official who said it's amateur hour in
S&P
I just got off a conference call from sources familiar with the interaction between
Treasury
and
S&P
, detailed what the error was, it had to do with calculations of levels of domestic discretionary spending over the next several years, have to do with which baseline they were using There's a lot of numbers back and forth. But, essentially, this is being portrayed from
Washington
's end as a
political
decision by
S&P
. They noted in their downgrade that there were
political
risks associated with the debacle that we just had in
Washington
over the debt ceiling. And so, they founded it largely based on that
political
exposure.
MADDOW:
Just to recap, in terms of
S&P
's statement on this -- I mean, "The downgrade reflects our views that the effectiveness, stability, and predictability of the policymaking and
political
institutions have weakened at a time of economic challenges. We are pessimistic about the capacity of
Congress
and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan." It's a very, very
political
document. What is the
White House
and
Treasury
are -- what is
Treasure
I guess saying is the
political
aim of the ratings agency in doing this, if this is a politically motivated decision?
HARWOOD:
Well, not politically motivated, but based on
political
criteria.
MADDOW:
Yes, plainly.
HARWOOD:
What's that?
MADDOW:
Plainly.
HARWOOD:
Absolutely. And look, to be honest, the president's own rhetoric has opened the door to a judgment of that kind. He said during the stalemate, we've got
AAA
credit. We don't have a
AAA
political system
. And
S&P
is essentially pointing to that, and immediately, you see the
political
fighting start. I've gotten tweets in the last few minutes,
Reince Priebus
, the chairman of the
RNC
, saying, "First credit downgrade in
U.S. history
under
Barack Obama.
"
Harry Reid
, the
Senate
leader, put out a statement saying, this shows the need for balanced deficit reduction, which
Republicans
resisted in the debt talks. So, this certainly isn't going to solve any of our
political
issues. It might, provide, though, some impetus if we need anymore and it can be effective in trying to get to the two sides together as we get to the special committee.
MADDOW:
It is striking to see -- as you say, such
political
-- such
political
language from the
rating agency
, almost giving us a
political
credit rating
rather than a default
credit rating
. There's very little in here in the press release about whether or not people who lend the
United States
money are likely to be paid back, which is purportedly what a
bond rating
is.
HARWOOD:
And that is precisely the counter argument you hear from administration officials. It is that, first of all,
U.S. treasury securities
are the most transparent, best known
financial instruments
in the world. Investors every day make judgments on their view of those instruments and they don't need to hear it from the credit
ratings agencies
. Secondly, there are three agencies, right? There's
Standard & Poor
's, but there's also
Fitch
and
Moody's
.
Fitch
and
Moody's
have stuck with the
AAA
. So, the administration is pointing to that, two of the three are with them. And, obviously, we've seen in the financial crisis in
2007
,
2008
,
2009
, the
ratings agencies
didn't exactly cover themselves in glory. I think the administration is hoping that the memories of that poor performance helps them fend off whatever fragile market reaction might be that this done.
MADDOW:
The market reaction is going to be incredible to see on Monday. Obviously, all eyes are going to be on that, and the
political reaction
. And we've had two huge shocks this week: a 500-point drop and this. If any sort of economic news can change
political
realities, these are the sorts of things that can do it.
HARWOOD:
Well, and,
Rachel
, the administration believes that on narrow economic terms, there aren't too many investors who will be required by the terms of their investment guidelines to divest because of this rating. However, when the market is -- the psyche of the market is as volatile as it is right now, you never know what's going to tip things and cause a huge reaction.
MADDOW:
John Harwood
,
CNBC
chief
Washington
correspondent and
political
writer for "
The New York Times
" and my old buddy who I don't see very much anymore, it's nice to see you,
John
.
HARWOOD:
Good to see you,
Rachel
.
MADDOW:
Even under extreme circumstances. Thanks.
HARWOOD:
Exactly.
MADDOW:
All right. A bit of good news today out of
Washington
, I swear. Good news for
Iraq and Afghanistan veterans
. Having good news to share about that particular group makes me very happy to share it with you. That's coming up next.
