The inside story of his brush with political disaster.

Shortly after four o’clock on the afternoon of Wednesday, April 13, 2011, U.S. Treasury Secretary Tim Geithner walked down the hallway near his office toward a large conference room facing the building’s interior. He was accompanied by a retinue of counselors and aides. When they arrived in the room—known around Treasury simply as “the large”—four people were seated at a long walnut table on the side near the door. Geithner and his entourage greeted them, then walked around to the far side and took their seats.

The four guests hailed from the credit-rating agency Standard & Poor’s (S&P), an outfit the administration’s economic team, like much of the financial world, held in exceedingly low regard. Long before the financial crisis of 2008, S&P and its fellow rating agencies had been derided on Wall Street as hubs for intellectual mediocrities—the clock-punchers that banks and hedge funds had passed over. Then, during the bubble years, the big banks became expert at duping the agencies into blessing their dodgy mortgage securities. Suffice it to say, Treasury was unimpressed with S&P’s analytical powers.

Geithner spoke to the credit-raters with thinly concealed skepticism. “He did not view these guys as worthy of this kind of meeting,” says one colleague. A few days before, S&P had warned Treasury it intended to downgrade its “outlook” on U.S. bonds, the first step toward withdrawing the triple-A status that essentially stamped them as riskless. But Geithner had no intention of begging them to change their minds. Treasury officials felt that if S&P moved ahead with this decision, the company would only embarrass itself, not the U.S. government. In this vein, Geithner simply informed the visitors that his country’s economic performance had exceeded S&P’s expectations on almost every measure it claimed to care about. As for the one where it lagged—the deficit—Geithner pointed out that the president had proposed cutting it by $4 trillion that very morning.

The de facto spokesperson for S&P, a mustachioed man named David Beers, confessed that the group’s concerns were really about politics, not economics. The administration’s ambitious deficit plan was all well and good, but the prospects for actually enacting one were vanishingly remote. Beers and his colleagues didn’t think Republicans would take the president’s deficit plan seriously. The parties were simply too far apart.

At this, Geithner became somewhat dismissive, according to three sources in the room. He asked how S&P could handicap a political debate in Washington given that its expertise, such as it was, lay in finance. It’s not your “comparative advantage,” the secretary said. Then he gestured toward the Obama officials seated on either side of him—Jack Lew, the White House budget director; Neal Wolin, the deputy Treasury secretary; Bruce Reed, the vice president’s chief of staff—and explained that all of them had been top aides to Bill Clinton during the last stand-off between a Democratic president and a Republican Congress. “We said, ‘This is the way it worked in the nineties,’” recalls one former administration official. “‘After a big election, when you have divided government, you fight a bit, then find a middle ground.’” Another official remembers arguing that “when both sides had firmly committed to a goal and the public was in support of it, it eventually had to happen.”