Investors all but bare their teeth at the mention of ratings agencies, after losing their shirts in the credit crisis. But the chickens may be coming home to roost!
Shares of Moody's and McGraw Hill (which owns S&P) fell sharply Thursday, a day after a judge ruled the pair, along with Morgan Stanley, must defend themselves against fraud claims.
In a court ruling Wednesday, a federal judge in New York allowed portions of a lawsuit to go forward which alleges the companies hid the risk of investing in a fund that purchased bonds backed by subprime mortgages.
Ratings agencies have come under intense scrutiny since the credit crisis for giving top-notch ratings to investments that were anything but top-notch.
And since that time boatloads of investors, including the Fast Money traders, have been calling for accountability. Some are out for blood – alleging that the crisis wouldn’t have been nearly so bad – if the ratings had properly reflected the risk.
As if investors weren’t already irate, CNBC’s Charlie Gasparino has done research on bonuses paid by the ratings agencies and his findings suggest there could be even more conflicts.
“Why were structured finance analysts paid so much more than other analysts and why were those ratings so much worse?”
Hear Gasparino's entire report! Watch the video now.