A snippet on MCO:
"Many of Moody’s ratings for subprime debt represent ‘shoddy goods’ according to Joseph Mann, a professor of finance at Drexel University. In a paper co-written with Joshua Rosner, an independent research analyst, Prof. Mason argues that the ratings agencies — including Standard & Poor’s Corp. and Fitch Ratings, as well as Moody’s — are deeply involved with investment bank underwriters in structuring pools of assets, which places them in a more active role than simply publishing opinions on the creditworthiness of underlying assets.
"In past lawsuits that have involved corporate debt ratings, judges have ruled that such rankings are opinions, like newspaper editorials, and are protected under the First Amendment. But, if lawyers can convince a judge that Moody’s debt ratings shouldn’t be treated as opinions, the company could be hurt by lawsuits.
"The argument against rating agencies appears to be gaining traction, at least in Ohio. The state’s attorney-general, Marc Dann, is investigating the role of the credit rating firms.
"Moody’ says it can’t be held responsible for drops in market values of certain assets, ‘Our ratings predict the probability of default. We do not offer views on market pricing,’ says Linda Huber, chief financial officer at Moody’s. ‘People enter the market and trade these securities at their own risk.’
"To date, Moody’s hasn’t been sued in federal court on any of its subline credit ratings, which constituted around 6% of its revenue last year. And while structured finance ratings made up 43% of its total revenue last year, another 40% came from non-US revenue, where there is also strong growth.
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