Moody's Brings In the Lawyers

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Market Movers

by Felix Salmon

Main

Extra Credit, Wednesday Edition When Hedges Fail

May 22 2008 6:30AM EDT

Moody's second statement on the CPDO scandal shows - in the wake of their stock falling 16% yesterday and Chuck Schumer breathing fire - that they're finally beginning grok just how serious it is. The first statement, you'll recall, merely said that they were "conducting a thorough review of this matter". The new one goes further, and explains that the thorough review will be an external review, by Sullivan and Cromwell. Better.

I do hope that the review, although it is confined to the "European CPDO ratings process," will be given the freedom to examine more generally the pressure on Moody's structured products group to deliver the triple-A ratings that investment banks were paying millions of dollars for. In this case, when Moody's found out that it couldn't get to triple-A one way, it lost no time in getting to triple-A some other way instead. If that happened in the European CPDO ratings group, it could have happened anywhere.

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