Sunday, May 25, 2008

Moody's Image

"Moody's Investors Service is clarifying its code of conduct to convince regulators and investors that its bond-rating analysts aren't too close to the companies they cover. ... Self-imposed reforms could help Moody's and rivals [S&P] and Fimalac SA's Fitch Ratings stave off a regulatory crackdown. ... The report concluded that analysts shouldn't make proposals or recommendations about the design of structured-finance products, since such consultations can been seen as compromising objectivity in rating bond deals", WSJ, 15 May 2008.

Big deal. I wouldn't put any credence in "self-imposed reforms". I've seen their history of failure in the CPA profession. See my 6 October and 28 December 2007 posts.


Edgar Alpo said...

Big deal. I wouldn't put any credence in "self-imposed reforms".

That's what I was thinking as I read the first paragraph. If companies want to pay Moody's to rate them that's fine by me, but I'll never trust another bond rating as long as I live. Some of the AAA stuff is going for 90%+ discounts, when they can get a bid at all. The long term implications of the loss of trust at the IBs and everywhere else has not been factored in, that is fatal for a confidence scheme.

Independent Accountant said...

The rating agencies are just part of Wall Street's marketing machine. If they want to restore credibility with me, let them forego any "First Amendment" immunity claims and let buyers of products they rated sue them for malpractice. Baring that, for my money, the rating agencies are just a lot of hot air. At least one can sue the Big 87654 firms from time-to-time.