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Moody's Latest Blows Satire Models' Circuits

by: Greg Newton September 05, 2008 | about stocks: ABN / JPM / LEH / MCO    
Greg Newton

Greg Newton

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Sept. 4 (Bloomberg) – Moody’s (MCO) Investors Service said it may cut the ratings of €854 million ($1.2 billion) of constant proportion debt obligations after disclosing a second error in the way it assesses the securities.

Moody's review was “prompted by the identification of a coding error in a model used for monitoring CPDOs,” the New York-based firm said in a statement today. Moody’s will probably downgrade the affected CPDOs by one or two levels, it said. The securities were sold by banks including ABN Amro Holding NV (ABN), JPMorgan Chase & Co (JPM) and Lehman Brothers Holdings Inc (LEH)...

David S. Products, a spokesman for NakedShorts, said in an official statement:

We are so blown away by the surrealness of this disclosure that our satire model has blown a circuit. Thus we are not able to add anything that could make this any funnier than it is.

Moody’s May Downgrade CPDOs After Error in New Model
by Neil Unmack and John Glover
Bloomberg Sep.4 2008

Earlier on NakedShorts:

That Moody’s investigation in fool I

May 23 2008

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This article has 2 comments:

  •  
    Sep 05 04:40 AM
    "Oops. We misplaced a couple of zeros. Real Estate may not only go up, evidently. We are downgrading Ottoman debt." People are going to get moody.
    Reply
  •  
    Sep 05 04:58 AM
    It would not surprise me to see legal action against Moody's. They knew about the mistake but failed to correct it. Some may have lost 90% of their investment. It just so happens that maintaining Aaa ratings was financially beneficial to Moody's. Smacks of constructive fraud, even if they weren't actually selling securities. A difficult case but ...

    It would be outrageous if the marketplace allowed Moody's to continue doing business, at the very least. Outrageous.
    Reply
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