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Musical chairs

From a WSJ alert:

Standard & Poor’s President Deven Sharma is leaving the credit-rating firm at the end of the year, according to a person familiar with the matter.

The credit-rating firm plans to announce Mr. Sharma’s exit on Tuesday before the markets open. Douglas Peterson, chief operating officer of Citigroup Inc.’s Citibank unit, will succeed Mr. Sharma on Sept. 12. Mr. Sharma will remain at S&P through the end of the year in an advisory capacity.

According to his Citi bio, Peterson has been with Citigroup for 25 years. Citibank has been a huge beneficiary of government largesse (#2 recipient of emergency lending from the Fed–over $100 BILLION) as well as an eager participant in the affordable housing game in the 1990’s and early 2000’s. They are not a particularly healthy institution. Nor have they given any sign of understanding risk in the traditional sense. Given the help they’ve received from Washington, maybe their executives understand it all too well.

I have tried a number of different additional sentences to summarize my thoughts but I keep crossing them out. The main thing to realize is that both Citibank and S&P have little to do with capitalism and everything to do with crony capitalism. This is a game of financial musical chairs where the government keeps the market from calling the tune. The cronies call the tune.

I should add one more thing. People talk as if S&P and Fitch and Moody’s are independent private organizations. They are, sort of. But the structure of regulation empowers them. Without the regulations requiring their imprimature, I’d assume they’d be gone. Without the implicit support of the regulatory apparatus, why are any of the ratings agencies in business?