Rating Firm Blamed for Subprime Crisis
WSJ — McGraw-Hill Cos. replaced the top executive at Standard & Poor’s Corp. as criticism of the company’s financial-information division mounts for its role in the unfolding subprime-mortgage crisis.
Kathleen Corbet, S&P’s president, is leaving to pursue other opportunities, McGraw-Hill Cos. said yesterday, without elaborating. She will be succeeded by Deven Sharma, 51 years old, a senior McGraw-Hill executive who has been at S&P since late last year.
S&P’s bond-rating arm and several other rating services have downgraded hundreds of mortgage-backed securities tied to subprime loans in recent months. Critics charge S&P and others were too optimistic about the market for too long. Ratings firms say they did the best they could with the information available at the time.
The company also compiles stock indexes such as the S&P’s Composite Index of 500 stocks, commonly known as the S&P 500.
McGraw-Hill’s shares soared during most of her S&P tenure, in part because of booming credit markets. Shares have tumbled 26% since the start of this year. Earlier this month, they hit a 52-week low of $47.15. The shares rose 48 cents to $50.27 yesterday in 4 p.m. New York Stock Exchange composite trading.
The credit-market turmoil has caused a sharp decline in the issuance of mortgage-backed securities and derivatives like collateralized debt obligations. During the past few years, a large chunk of S&P’s revenue has come from rating these “structured-finance” products, which bring in more fees than rating corporate and municipal bonds.
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