Circa, February 2009, Joint Session of the US Congress:
“Here in Washington, we’ve all seen how quickly good intentions can turn into broken promises and wasteful spending. And, with a plan of this scale comes enormous responsibility to get it right. That is why I have asked Vice-President Biden to lead a tough, unprecedented oversight effort — because nobody messes with Joe,” President Barack Obama sounded out a warning to anyone who comes in the way of Joe, the average American citizen, on his road to recovery from the painful downturn.
Deven Sharma probably underestimated the scope of that red herring, if he had not missed it. Today, he paid the price for messing with Joe, losing his job as the president of credit rating agency Standard & Poor’s.
The timing of the move has led to widespread speculation that it was a direct consequence of the rating company’s unprecedented downgrade of the US government debt, allegedly based on incorrect data.
Soon after the downgrade, the US Treasury department alleged the agency had underestimated the long-term impact of congressional debt-cutting measures by $2 trillion. Sharma stood by his analysts and defended the move.
The downgrade not only burnt investor wealth worth trillions of dollars in the stock markets in the US and across the world, but also had repercussions in Main Street, bringing back fears of a double-dip recession. Some financial services firms have already announced job cuts and more are rumoured to follow suit.
Thus, Sharma hit the Average Joe hard, though not directly. The fact that other raters Moody’s and Fitch maintained their top rating on US debt only added to the discomfort.
His career still seemed to be safe as a statement by McGraw-Hill Cos, the parent of S&P, painted it as a move contemplated at least a year ago.
Sharma will be succeeded on September 12 by Citibank Chief Operating Officer Douglas Peterson. Sharma, 57, was educated in Jamshedpur and Ranchi, and then moved to the US for his masters degree at Wisconsin and his doctoral degree in management from Ohio in 1987. During his initial years, he was in the manufacturing sector, working with Dresser Industries and Anderson Strathclyde.
In 1988, he joined Booz, Allen & Hamilton, a global management consulting firm, where he spent 14 years. In 2002, he joined The McGraw-Hill Cos.
Sharma took over as the president of S&P in August 2007, just when the sub-prime crisis in the US housing sector was getting out of hand, and credit rating agencies were picked as one of the perpetrators of the meltdown for their flawed ratings models of housing loans. Questions on credibility and scrutiny are not new to Sharma. Over the last four years, he has faced several US Congressional enquiries and media scrutiny over the role of the raters in the sub-prime market, but has come out unscathed.
But this time, he did not have a chance. He did something that cannot be tolerated....He messed with Joe.