Wow. Talk about just blowing away your (remaining) credibility…Moody's Begins Probe on Report Bug Caused Aaa Grades (Update1): “Moody's Investors Service said it's conducting “a thorough review” after the Financial Times reported that a computer error was responsible for Aaa ratings being assigned to complex debt securities that slumped in value.Banks obtained the highest grades in 2006 and 2007 for constant proportion debt obligations, funds sold in Europe that used borrowed money to speculate on an improvement in credit quality. The subprime crisis caused banks including UBS AG and ABN Amro Holding NV to unwind their CPDOs, triggering losses of as much as 90 percent for investors.Some senior staff at Moody's were aware in early 2007 that CPDOs rated Aaa the previous year should have been ranked as many as four levels lower, the FT reported today, citing internal Moody's documents. The firm adjusted some assumptions to avoid having to assign lower grades, the paper said.”OMG. OMG. The implications of that last paragraph are absolutely insane. “Some senior staff at Moody's were aware in EARLY 2007 that CPDOs rated Aaa the previous year should have been ranked as many as FOUR LEVELS LOWER, the FT reported today, citing internal Moody's documents. The firm ADJUSTED SOME ASSUMPTIONS TO AVOID having to assign lower grades, the paper said.”First they make a mistake they shouldn’t have made. I mean, where were the checks and balances? Where were the reviews? Second, they then take that honest mistake and go criminal with it. Just brilliant. Amazing really.I see lawsuits… lots of lawsuits in the very near future…“If it is true, does that mean other products haven't been rated correctly? Will they be downgraded? It could lead to turmoil.” -Puneet Sharma, Barclays Capital's head of investment-grade credit strategy in London.The falling 200 day EMA should provide resistance here.
