New York To Unveil Deal With Ratings Agencies
Moody's Investors Service and other rating agencies have signed an agreement with New York Attorney General Andrew Cuomo addressing rating practices, including fees, Moody's Chairman Ray McDaniel said Thursday.
The New York Attorney General is expected to sign the agreement on Thursday, said McDaniel, speaking at a Moody's conference for investors in New York.
Cuomo's office said Wednesday it plans to announce a "major development" in its ongoing investigation of the mortgage loan industry at 11:30 a.m.Thursday.
In a separate advisory Thursday, the office said Deven Sharma, President of McGraw-Hill's Standard and Poor's unit; Stephen W. Joynt, President and CEO of Fimalac's Fitch Ratings; and Michel Madelain, Chief Operating Officer of Moody's Moody's Investors Service unit, will attend the event. A spokesman for Cuomo declined further comment.
The attorney general has been looking into Wall Street's role in the subprime mortgage crisis, including rating agency practices.
In the wake of the crisis in risky U.S. subprime mortgages, rating agencies were criticized for feeding the housing slump and credit market turmoil by assigning high ratings to risky securities that later tumbled in value.
John Goggins, senior vice president and general counsel at Moody's, added that he expects to have a rating settlement with Connecticut as well.
McDaniel also said an external investigation over a possible rating error by Moody's for complex European debt is "ongoing."
The Financial Times last month reported that a coding error in a Moody's computer model caused the complex debt to have a rating four levels higher than merited, and that Moody's did not correct the error quickly.
"The real heart of the story was that a model error was covered up, and it was covered up by a change in the methodology," McDaniel said, noting Moody's takes the charges very seriously. "It goes to the core of our values in terms of integrity and independence and lack of bias in our ratings."