Former Employees Speak Out Against Rating Agencies

July 9, 2010 by · Leave a Comment
Filed under: The Rating Agencies 

Former executives at Moody’s Investors Service and Standard & Poor’s criticized the firms at a hearing before the Senate Permanent Subcommittee on Investigations. They testified that the companies allowed a competitive culture and conflicts of interest to compromise their ratings of complex securities.

“It was an unspoken understanding that loss of market share would cause a manager to lose his or her job,” said Eric Kolchinsky, a former managing director at Moody’s. He said that he was suspended after warning in September 2007 that a batch of securities “being hyper-aggressively pushed by the bankers” had been assigned an inflated rating.

Several current managing directors also testified, including Kathleen A. Corbet, who was president of Standard & Poor’s from 2004 to 2007; and Raymond W. McDaniel Jr., the chairman and chief executive of Moody’s.

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