Moody’s, S&P, And Moral Relativism
June 2, 2010 by Douglas A. McIntyreA former employee of Moody’s testified before The Financial Crisis Inquiry Commission that he felt pressure from his superiors to improve market share for the company. That caused him and other employees of Moody’s to rate debt products higher than they deserved. Clients were helped by the relatively high opinions which in turn helped them sell bad paper to customers. Hence, Moody’s got more business.
According to Reuters, “It was very clear to me that my future at the firm and my compensation would be based on the market share,” said Eric Kolchinsky, who once ran the Moody’s Investors Service unit that rated subprime collateralized debt obligation. Apparently, S&P employees were under similar pressure.
Their argument is that it was alright to game ratings if it was in the name of remaining employed.
Douglas A. McIntyre
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