Credit ratings agencies are coming under fire and this time, it's Moody's turn.
William Harrington, until 2010 a senior analyst in the firm's derivatives group, is now accusing Moody's of all sorts of shenanigans, from tailoring its securities ratings to suit financial industry clients to lying to lawmakers about the company's actions. In his letter to the US Securities and Exchange Commission, Harrington says the firm's compliance division "actively harasses analysts viewed as "troublesome", i.e. independent, and is well-experienced in doing so."
Given that Moody's is paid by the companies it's rating, there is a real conflict of interest which, Harrington says, is seen in their decision making.
"Moody's incentivized an analyst to accede to all items demanded by an external paymaster and to work to the paymaster's schedule," Harrington wrote. "The ongoing, unresolved conflict of interest plays out in the formation of Moody's opinions. These public opinions of Moody's are often at odds with its private opinions. In some cases, the distinction between public and private opinion is an explicit one." Moody's has defended itself as you would expect.
All this comes at a time when the SEC is already investigating Standard & Poor's for insider trading.
That investigation and Harrington's allegations, suggest there are serious concerns about the integrity of agencies at a time when they have so much influence. This needs to be addressed if the financial system is to be healed.
no comment untill now