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Moody’s Says Workers Rated Some Securities Incorrectly
Published: July 2, 2008
Already under intense scrutiny for its role in the credit crisis, the Moody’s Corporation said Tuesday that some employees violated its code of conduct in rating some complex European securities.
The company said that it would discipline and possibly fire employees who were involved in rating the debt, which are known as constant proportion debt obligations. Separately, Moody’s said it was replacing the executive, Noel Kirnon, who is in charge of its structured finance business at its subsidiary, Moody’s Investors Service.
The news comes as policy makers around the world are looking into how Moody’s and its competitors, Standard & Poor’s and Fitch Ratings, gave high ratings to mortgage and related securities that turned out to be far riskier and have cost hundreds of billons of dollars in losses to the financial system. The companies are the subject of several investigations in the United States and Europe.
Critics have asserted that Moody’s and its peers succumbed to pressures from investment banks that were packaging complex and risky debt during the credit boom of earlier this decade. The rating firms are paid by issuers of securities, and only receive a relatively small percentage of their revenue from investors who use their ratings to evaluate bonds and other fixed-income securities.
http://www.nytimes.com/2008/07/02/business/02moodys.html?_r=1&partner=MYWAY&ei=5065&oref=slogin
Published: July 2, 2008
Already under intense scrutiny for its role in the credit crisis, the Moody’s Corporation said Tuesday that some employees violated its code of conduct in rating some complex European securities.
The company said that it would discipline and possibly fire employees who were involved in rating the debt, which are known as constant proportion debt obligations. Separately, Moody’s said it was replacing the executive, Noel Kirnon, who is in charge of its structured finance business at its subsidiary, Moody’s Investors Service.
The news comes as policy makers around the world are looking into how Moody’s and its competitors, Standard & Poor’s and Fitch Ratings, gave high ratings to mortgage and related securities that turned out to be far riskier and have cost hundreds of billons of dollars in losses to the financial system. The companies are the subject of several investigations in the United States and Europe.
Critics have asserted that Moody’s and its peers succumbed to pressures from investment banks that were packaging complex and risky debt during the credit boom of earlier this decade. The rating firms are paid by issuers of securities, and only receive a relatively small percentage of their revenue from investors who use their ratings to evaluate bonds and other fixed-income securities.
http://www.nytimes.com/2008/07/02/business/02moodys.html?_r=1&partner=MYWAY&ei=5065&oref=slogin