Fox & Friends pushed a baseless theory that the Obama administration is "bullying" Standard & Poor's (S&P) and getting "revenge" over its downgrade of U.S. credit by "pushing" S&P president Deven Sharma "out the door" and conducting an investigation into S&P's ratings of mortgage-backed securities. But Sharma has been planning his departure since at least the end of 2010, and the Financial Times reported that his resignation is "unrelated to the downgrade"; further, the Department of Justice investigation is related to S&P's role in the financial crisis and began before S&P issued its downgrade.
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S&P President Deven Sharma Announces Departure
Reuters: "Deven Sharma To Step Down As S&P President." From an August 22 Reuters article:
Deven Sharma will step down as president of ratings agency Standard & Poor's to work on the company's strategic portfolio review before leaving the company at the end of the year.
Sharma will be replaced as president of the ratings agency by Douglas Peterson, chief operating officer of Citibank effective Sept. 12, S&P's parent company McGraw-Hill said in a statement. [Reuters, 8/22/11, via CNBC.com]
Fox Claims S&P President's Retirement, DOJ Investigations Are "A Case Of Revenge" By Obama Admin.
Varney: "Is This A Case Of Pushing The Guy Out The Door ... Because You Don't Like What He Did To America's Triple A Credit Rating?" On the August 23 edition of Fox News' Fox & Friends, Fox Business host Stuart Varney asked, "Is this a case of pushing [Sharma] out the door ... because you don't like what he did to America's triple A credit rating?" Co-host Steve Doocy responded, "Of course it is!" Varney later said that Sharma's retirement, along with the announcement that the Department of Justice is investigating S&P for its ratings of mortgage-backed securities, was a "case of revenge" by the Obama administration, despite noting that a recent New York Times article reported that "it's not revenge." From the broadcast:
BRIAN KILMEADE (co-host): Just weeks after Standard & Poor's stripped the United States of its sterling triple A credit status, the president of the credit rating agency, Deven Sharma, stepping down.
JULIET HUDDY (guest host): Shortly after the downgrade, the Justice Department initiated an investigation into the S&P for its practices concerning mortgage securities from some -- causing some to question whether or not the Obama administration was retaliating.
DOOCY: Is it payback? Stuart Varney joins us right now. Stuart, I've heard two stories. One is that they had initiated the investigation before the downgrade and that one suggests after.
VARNEY: Yes, look, is this a case of bullying? Is this a case of pushing the guy out the door? Is this a case of revenge because you don't like what he did to America's triple A credit rating?
DOOCY: Of course it is!
VARNEY: Well, The New York Times says that talking to -- according to people briefed on the matter, no, it's not revenge.
VARNEY: Nothing to do with it whatsoever.
DOOCY: Well, then that must be the truth, if The New York Times says it.
VARNEY: Look, if you want to get private enterprise moving -- if you want to get private, the private sector to hire people and expand the economy, how do you do that if you're the administration? Do you bully them? Do you go after them? Do you seek revenge? Do you call them names? Do you tax them? Do you regulate them? Do you go after them like this? No, you don't. This is not a very good way for the administration to set about rejuvenating the economy. I think it is a case of revenge. I think it is a case of bullying the guys who downgraded you. [Fox News, Fox & Friends, 8/23/11]
But S&P Began Search For New President In 2010, And Sharma's Resignation Is "Unrelated To The Downgrade"
Reuters: "[S&P] Said It Began A Search For A New President ... At The End Of Last Year." In its August 22 article about Sharma's departure, Reuters noted, "[S&P] said it began a search for a new president for S&P after the company split S&P into two separate organizations at the end of last year." [Reuters, 8/22/11, via CNBC.com]
Financial Times: "People Close To The Company Said The Search For Mr Sharma's Replacement Has Been Going On For Six Months." An August 23 article in Financial Times reported:
People close to the company said the search for Mr Sharma's replacement has been going on for six months, and was triggered by the split of its data, pricing and analytics business from its ratings business. The creation of that new group, McGraw-Hill Financial, reduced the scope of Mr Sharma's oversight, they said. [Financial Times, 8/23/11]
Financial Times: "People Familiar With The Matter Said Mr Sharma's Departure Was Unrelated To The Downgrade." The Financial Times article also reported, "People familiar with the matter said Mr Sharma's departure was unrelated to the downgrade or reports that S&P is being investigated by the justice department in connection with its ratings of dozens of mortgage securities in the years leading up to the financial crisis." [Financial Times, 8/23/11]
NYT: "[C]orporate Reorganization Left Mr. Sharma With Less Responsibility ... Prompting His Desire To Leave." From an August 22 post on The New York Times' DealBook blog:
But people briefed on the matter said Mr. Sharma had been considering stepping down well before the latest attacks on the company. They say that Mr. Sharma first began pondering his options after McGraw-Hill announced last November that Standard & Poor's would be split into its two component businesses.
That corporate reorganization left Mr. Sharma with less responsibility, leading him to ask about his odds of eventually becoming the company's chief executive. He was informed that such a move would be unlikely, prompting his desire to leave, one of these people said. Then McGraw-Hill began a search for his successor at Standard & Poor's, this person added. [The New York Times, 8/22/11]
DOJ Probe Tied To S&P's Lack Of Credibility, And Ratings Agencies Have Routinely Testified Before Congress About Their Ratings
NYT: Justice Investigating Whether S&P "Improperly Rated Dozens Of Mortgage Securities In The Years Leading Up To The Financial Crisis." The New York Times reported on August 17 that the Justice Department "is investigating whether ... [S&P] improperly rated dozens of mortgage securities in the years leading up to the financial crisis" and that "[t]he investigation began before Standard & Poor's cut the United States' AAA credit rating." From the Times:
The Justice Department is investigating whether the nation's largest credit ratings agency, Standard & Poor's, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor's cut the United States' AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency's secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations. [The New York Times, 8/17/11]
S&P Lacks Credibility, Called "Key [Enabler] Of The Financial Meltdown" By Congressional Commission. A January 2011 report released by a congressional commission on the causes of the economic crisis in the U.S. concluded that "the failures of credit rating agencies were essential cogs in the wheel of financial destruction" that led to the economic recession. [The Financial Crisis Inquiry Report, Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, January 2011, via Media Matters]
For more on S&P's lack of credibility, SEE HERE.
Ratings Agencies Routinely Testify Before Congress About Their Ratings. S&P testified before Congress about its ratings in 2002, 2007, and 2008. [Media Matters, 8/11/11]
For more on the Department of Justice's investigation into S&P's ratings of mortgage-backed securities, SEE HERE.