You can call John Chambers and David Beers and S&P Ratings anything you want.  I call Beers and Chambers the good guys and I am thankful that the good guys are back in charge of at least one part of  S&P. 

You should be too. 

In Cormac McCarthy’s post apocalyptic novel, “The Road,” the man’s young son looks up from a world of ash and carnage and says, “We’re the good guys, right Dad?” And the father says in fact, yes, they are, and the world needs good guys.

We are not in an apocalyptic era, but there is enough drifting ash in the air to make it hard to find the good guys.  I am happy that two of them showed up. 

Here’s who they are.  

Chambers and Beers are not your typical Wall Street analysts.  They are slightly tweedy, a tad academic.  Chambers reads Joyce.  Beers sports a soup strainer walrus mustache. 

They are about as un-Wall Streetie as you can get and that’s always been fine with them and the dozens of other “lifers” at S&P Ratings.  The analysts on the Street don’t particularly like the lifers at S&P and most certainly they are cut from a different cloth.

The pitch to rating analysts from the late Leo O’Neill of S&P always went something like this:

“You can walk across the street and earn a million dollars a year, work nights, weekends  and try to remember when you last saw your kids, or you can stay here, earn decent enough money, be home on the weekends,  do good work, and have a life.”

I was skeptical of that when I walked in the door in 1992 to become vice president of publishing and wondered whether I could work there for long.  I had arrived freighted with a certain set of standards acquired during a 20 year career as an investigative reporter during which I had written stories that lead directly to the arrest of more than 20 white collar criminals in the government and corporate world and felony convictions of two major American corporations. 

The concept of paid ratings seemed like a joke to me and It was not long before the first test.  At the governance board of the insurance rating division, analysts had deadlocked on whether to upgrade or downgrade a well-known firm.  The insurance company of course was keen for a better rating and had paid S&P anywhere from $50,000 to $100,000 to get one. 

So I figured what followed would be short and simple.  Everyone knows whose side of the bread is buttered in such a deal.   The vice president of marketing even got a vote on the matter, and I settled back into my chair as he rose to speak, thinking to my self exactly how I would phrase my resignation letter after finding my next job. 

“No upgrade,” the marketing guy said. “It’s not in the numbers and as a firm we have nothing if we don’t have trust and credibility.”

There was a rumbling of agreement and the 11 member governance board rejected the upgrade in about 90 seconds.  

It was like that in the 1990s.  Leo O’Neill, the president of S&P then, established   a collegial, peer-driven culture.  Committees of up to seven analysts would meet to consider a rating and the discussions and arguments could go on for hours.  It was horribly inefficient. The analysts were overly introspective.  Many times, sessions seemed like faculty caucuses or accounting trivia clubs.  

Yet there was a focus always on the balance sheets of the companies, never on what it meant to S&P revenues.  The analytical culture reigned, not the accountants, and the firm returned solid 40 percent margins to its parent McGraw Hill.  

This was when the good guys ran the company.  They were slow, too slow for my journalistic reflexes.  

But they were not producing exposes.  They were providing fair and accurate ratings. And study after study showed that on balance, the system worked.  The ratings historically expressed reality. 

Never was I fan of “paid” ratings but in my nine years there, my antennae never caught a whiff of fraud.  The paradox was that to have value, the rating needed to be valid -- not a Better Business Bureau happy face sticker.   S&P in effect shot its way into the insurance rating business by issuing tougher ratings than Best’s  And in Japan, the firm lead the way in downgrading many Japanese banks that had been overrated for years, even though that hurt the rating business there in the short to mid-term. 

In a way, it’s disappointing.  I’m a good journalist, a published author and a decent writer.  Such a book I could write about corrupt rating agencies taking bribes under the table.  It just didn’t happen. 

 I left at the end of 2000 just as structured finance was on the rise and throwing jet fuel on the ratings business.  Leo O’Neill died of cancer, tragically, before he could transition the leadership.  

What happened to cause S&P to so badly miss the structured financial ratings of the collateral debt and mortgage obligations? 


 I was not present, but feel I’ve a good idea from the casual stories over the years. 

The culture and the leadership changed. Old ways were disdained.  A lot of the lifers left or were encouraged to leave. They were not fast enough guns in a new age more akin to investment banking.  Even when I was still there, McGraw Hill was looking for 60 percent margins, not just 40.  There was a move toward far less introspection, just production.   

The “miss” on mortgages can never be excused or forgotten.

But Beers and Chambers were not a part of the structured mess.  They are old school S&P, the sons of Leo O’Neill  in spirit and like dozens of other good rating analysts were thrown into the same cauldron as the mortgage raters. 

I should say also that they are not friends of mine and I have not seen them or communicated with them in at least 12 years.   

I do know that they are ethical, expert and devoted to their work.   

Argue with them all you want  on methodology and technique. 

But honor them for their integrity and courage.   

Those qualities are in short supply right now.  


At a time when we needed it, two good men stood up and took the heat to say what they believe is important and true.