Moody’s has detractors
A firm being considered by the Nevada Legislature to study Nevada’s tax structure has been the target of sharp criticism since the country’s financial meltdown. Moody’s Analytics has been chosen by a legislative subcommittee to handle the Nevada chore, though talks are continuing with another firm in case Moody’s and the lawmakers can’t reach agreement on a contract. Moody’s Analytics is a research arm of Moody’s Investor Services.
The leading credit-rating firms—Moody’s, Standard & Poor’s and Fitch Ratings—have been harshly criticized for giving favorable ratings to mortgage-related securities backed by predatory loans, which ratings in turn inflated the confidence of banks and investors.
The Securities and Exchange Commission in July 2008 found the three firms improperly handled conflicts of interest and violated their own procedures in granting top rankings to mortgage bonds.
A McClatchy Newspapers story reported that “Moody’s punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.” The Washington Post reported on an alleged blackmail scheme in which Moody’s offered its services to a firm that saw its Moody’s rating fall when it declined the offer.
Since the meltdown, Moody’s has been a target of investigations by the SEC, New York attorney general, and congressional committees, and the National Association of Insurance Commissioners is considering a plan to reduce Moody’s rating role.
Moody’s has denied the various charges and a spokesperson told McClatchy, “Moody’s has rigorous standards in place to protect the integrity of ratings from commercial considerations.”