"How Moody's Sold Its Ratings -- and Sold Out Investors" is a terrific piece of reporting by McClatchy's Kevin G. Hall that achieves something I would not have thought possible: Making the investment-rating service Moody's look even worse than everyone already assumed it to be.
Moody's, reports Hall, systematically fired people who questioned how the agency was rating complex securities -- and then replaced them with executives from the very departments that were helping cook up those securities in cahoots with the investment banks. We already knew that there was a fundamental conflict of interest at the heart of Moody's business model -- its profits depended on fees paid by the companies whose products it was rating. But we didn't know that anybody who squawked about the problem was beheaded. It's a good read, and yet another compelling exhibit for the prosecution in the case against insufficiently regulated free-market capitalism.
The article also includes what's got to be the best laugh-out-loud journalistic disclaimer I've read all year.
Moody's, which rates McClatchy's debt and assigns it quite low value, disputes every allegation against it.
Talk about your Caesar's-wife-must-be-above-suspicion moments! It's always good, when writing about conflicts of interest, to acknowledge anything on your own side that smacks of impropriety. But the addition of the word "quite" in that sentence suggests someone at McClatchy was having some fun.
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