Deven Sharma, current president of Standard and Poor’s, announced today that he will step down to “pursue other interests.” As of September 12, 2011, Sharma will change his role at the S&P rating agency from president to advisor to the parent company, McGraw-Hill Companies, until the end of the year. He will be replaced by Douglas Peterson, currently the chief operating officer of Citibank.
The Timing of Sharma’s Departure from Standard & Poor’s
S&P’s Sharma to Leave, Replaced by Citi’s Peterson – Bloomberg
On August 5, 2011, S&P downgraded the U.S. from AAA to AA+ even though the S.E.C. confronted S&P with a $2 Trillion dollar error in their calculations. S&P simply brushed off their $2 Trillion dollar miscalculation of U.S. Debt and claimed that it still would downgrade the U.S.
In the last few days the S.E.C. has finally announced it is investigating S&P for its role in the economic meltdown between 2008-2009 which many claim was due in large part to S&Ps incorrect AAA ratings of junk bond mortgage-backed securities. Sharma has been President of S&P since 2007.
According to Yahoo Finance:
The U.S. downgrade on August 5 helped lead to the biggest sell-off in share markets since the global financial crisis three years earlier and sparked a row with the U.S. Treasury over some of the agency’s calculations in arriving at the new rating.
The U.S. Justice Department is also investigating the ratings agency over its actions on mortgages leading up to the 2008-2009 crisis, a source familiar with the matter told Reuters last week.
Even though McGraw-Hill Companies, Inc. claims there is no connection between Sharma’s departure and the recent flack over downgrading the U.S. from AAA to AA+, the timing of Sharma’s departure is stunning.
Is McGraw-Hill restructuring of S&P an attempt to placate an angry public over S&Ps continued missteps and seemingly self-interested actions in the market place from how it rates corporations differently from cities, states and countries? And is Sharma’s departure an effort to divert attention from S&Ps lobbying efforts to derail stiffer requirements for transparency about its rating practices and methodologies under the Dodd-Frank Wall Street Reform Act?