New credit warnings as US lawmakers trade blame

US Treasury Secretary Timothy Geithner insisted the economy was strong and blasted an unprecedented credit downgrade as “terrible judgment” yesterday as he sought to reassure jittery investors rushing to sell US securities.

Mr Geithner spoke in a television interview as G7 central bankers and financial chiefs pledged to “take all necessary measures” to support financial stability and growth in the wake of a eurozone crisis and the US credit downgrade.

But Standard and Poor’s managing director warned of possible further downgrades if Washington fails to get its fiscal house in order.

“If the fiscal position of the United States deteriorates further, or if the political gridlock becomes more entrenched, then that could lead to (another) downgrade,” S&P ratings head John Chambers told ABC television.

The first day of trading following the downgrade saw Asian stocks tumble. Tokyo shed 2.18 per cent, Seoul sank 3.82 per cent, and Sydney fell 2.91 per cent while Shanghai lost 3.79 per cent.

Major European markets also opened with losses but sentiment picked up after the European Central Bank bought eurozone government bonds, taking the pressure off Italy and Spain.

Futures pointed to upcoming losses on Wall Street as well – just hours before trading was due to resume. Dow Jones Industrials futures were off 2.3 per cent while broader S&P 500 futures shed 2.6 per cent.

Standard and Poor’s stunned Americans Friday when it lowered the credit rating for US Treasures for the first time ever from a sterling AAA to AA+, pointing out deep divisions in Washington over its long-term fiscal standing.

“I think S&P has shown really terrible judgment and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic US fiscal budget math, and I think they came to exactly the wrong conclusion,” Mr Geithner said.