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S&P won’t publish names or panel’s deliberations
New York Times
10 August 2011
A committee of about a half dozen largely unknown people made a decision last Friday that has roiled Washington and Wall Street.
That committee operates deep inside Standard & Poor’s, the credit rating agency that downgraded US debt for the first time in history. Despite the great interest in the agency’s decision, it has remained tight-lipped on what happened in their deliberations.
The individuals most responsible for the decision are not well known, except to finance ministers. S&P has declined to say whether the vote was unanimous, to identify all the members of the committee that voted for the downgrade or even say how many are on it.
S&P’s downgrade of the nation’s credit rating has raised questions about the company’s judgment and even its role in the financial markets. It has also reinvigorated critics of the rating agencies, who have argued since the 2008 financial crisis that the power of S&P and other agencies - which failed to foresee the problems with mortgage-related securities - should be reduced.
S&P, for its part, has defended its decision but has stayed quiet about its internal deliberations. There is no rater of the raters.
When asked whether the company’s raters were hiding behind the secretive committee, S&P spokeswoman Catherine Mathis said: ‘We do this to maintain our analytical independence in much the same way that the editorial board of The New York Times does not discuss its deliberations.’
She also said the company had many checks and balances and that its commercial role was separate from its analytical role.
The three people who have been associated with the decision are David Beers, head of the sovereign ratings division; his deputy John Chambers; and Nikola Swann, an analyst who is responsible for ratings in the US, Canada and Bermuda.
The three men, who are based in different parts of the world, have all spent the majority of their careers at S&P rating countries around the world. Their days are typically filled with number-crunching, conversations with investors and foreign budget officials and debate about the conclusions of their reports.
According to people who have worked with them, they pride themselves on the independence of their ratings, and going against the grain can seem like a badge of honour.
‘Being the last to move or being clearly late was always a bad thing,’ said Philip Alexander, a finance editor for The Banker who edited research and news releases for the sovereign team out of London from 2004 to 2007.
Mr. Alexander worked near Mr. Beers, head of S&P’s sovereign ratings, as part of a close team of about a dozen people in London who played badminton together at times in a nearby court. He remembered that Mr. Beers, who worked earlier in his career at Salomon Brothers and Bankers Trust, ‘liked a bit of a scrap’.
He recalled a time when he overheard Mr. Beers, now 58, on the phone with an angry bondholder defending S&P’s decision to upgrade Argentina in 2005. The country had defaulted and restructured its debt, causing losses among bondholders. ‘From the sound of things, David relished putting him down,’ Mr. Alexander said.
Mr. Chambers, the deputy head of sovereign ratings who is based in New York, is more soft-spoken than Mr. Beers, said US government officials who have met him. Some news reports have noted that the 55-year-old was a swimming champion at Grinnell College and a literature major. His wife worked as a freelance art director for The New York Times in the 1990s.
Mr. Swann, 38, is based in Canada, where he worked for the government’s department of finance before joining S&P in 2002.
It is possible the furore over S&P’s decision might persuade lawmakers to consider laws to change the ratings companies or to even spur competition through start-ups.