By Peter Schroeder - 05/12/14 10:20 AM EDT
Former Treasury Secretary Timothy Geithner says congressional Republicans staked out “insane” demands in 2011 debt-ceiling negotiations, driven by "extremists" among them.
Geithner argues in a new book that party leaders, including Speaker John Boehner (R-Ohio), dug in against a borrowing boost three years ago, making strong demands on “a routine piece of legislative housekeeping.”
The 2011 debt-limit standoff was the worst of the divided Congress, putting the nation’s ability to pay its bills in doubt within hours of the Treasury Department’s deadline. The high drama also led to the first-ever downgrade of the nation’s credit rating from Standard & Poor’s.
The final agreement also established the so-called supercommittee, the congressional panel tapped with coming up with a broad deficit reduction agreement. When that group failed to strike a deal months later, the sequester cuts that were recently partly rolled back were put in place.
As Boehner met with White House officials to try and hammer out a deal, Geithner says the GOP leader had “obvious discomfort” with the right flank of his party, painting Boehner as a solitary figure trying to avoid catastrophe.
“There was a weird dynamic to the talks, because Boehner truly seemed to want a deal, while [House Majority Leader Eric] Cantor [R-Va.] and his colleagues seemed to be watching Boehner to make sure he didn’t cut a deal,” he wrote.
Geithner recounts talks occurring in fits and starts between a host of GOP leaders in Congress and the White House, as the nation marched toward the Aug. 2 deadline Geithner set for when the U.S. could no longer pay its bills.
With no resolution in sight two days before that deadline, Geithner says he met in the Oval Office to discuss delivering a statement to prepare markets for the “gruesome spectacle” of a default.
“Even at my lowest points [during the financial crisis] I had never felt this kind of dread,” he wrote.
Geithner also writes that neither he nor the White House ever seriously considered some novel workarounds to the debt limit — such as invoking the Fourteenth Amendment to declare the debt limit void, or minting a trillion dollar platinum coin to cover the nation’s debts without congressional approval.
He dismissed such ideas as not “viable.”
“We were not a banana republic,” he wrote. “We needed a deal through the democratic process.”
Geithner also excoriates Standard & Poor’s for its downgrade, calling it a “stunning act of folly.”
“A rating agency that had given AAA seals of approval to all kinds of toxic mortgage securities suddenly planned to declare the world’s safest investment a credit risk,” he wrote.
Treasury officials strongly disputed the downgrade decision when it was made, arguing that the rater had made a $2 trillion math error in its original justification. When the rater was notified of the error before the downgrade was made public, they corrected the math and emphasized the political dysfunction, rather than hard numbers, as the main criteria for lowering the U.S.’s credit reputation for the first time in history.