'Carelessness Towards the Law' at Ratings Agencies

Reform of rating agencies is badly needed as there is a culture of carelessness towards the law which needs challenging, Eric Kolchinsky, a former analyst at Moody's who has accused the agency of issuing inflated ratings, told CNBC Friday.

"I don't want to overstate this but years and decades of saying we have this first amendment protection has created carelessness towards the law. I think that's sort of a cultural problem in the rating agencies," Kolchinsky, who was suspended by the agency, said.

Kolchinsky has accused Moody's Investor Service of issuing a high rating to a complicated debt security in January, in spite of it being aware it was planning to downgrade assets backing the securities.

(See the accompanying video for the complete interview.)

"They knew the ratings were wrong and still, with that knowledge, they rated it as high rate," he told "Squawk Box."

He sent a detailed report of his findings to Congress.

"Hopefully you'll have a real rating agencies reform, capital markets reform, but I don't know," Kolchinsky said.

Moody's said they investigated all Kolchinsky's claims and found they were unsupported.

"Moody's is confident in the integrity of its people and its processes," the agency said in a statement. Kolchinsky is currently unemployed.

"Right now I'm looking for work, like a lot of other people," he told CNBC.