A story on how Moody's gave AAA ratings to the then new debt instrument Constant Proportion Debt Obligations - CPDOs (not C3POs!) - only to later discover an error in their models should have rated the instruments as much riskier. Ouch. What makes it worse, however, is that Moody's managers kept quiet about it when they discovered the flaw.
The story sounds a little suspicious to me (I smell a scapegoat) because Standard & Poors, the other major ratings agency, gave the same AAA rating to the instruments. Did both agencies "arrive" at the same rating under pressure by various financial institutions? (It takes rating from two agencies before a new instrument can be traded.)
If the subprime crisis hasn't already reminded people that you can't blindly trust the ratings agencies...
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