Moody’s, S&P and Fitch took a lot of flak for being a little too optimistic about the creditworthiness of derivatives before those derivatives proved anything but creditworthy. S&P gotsued over it, but there may have been other motivations for that, and the other two, as well as the industry as a whole, more or less got away scot-free.
Well, S&P and Fitch—and smaller, insignificant players in the space—are back up to their old tricks, Moody’s huffs in a new report.
The report criticized other ratings firms for requiring much smaller cushions. The gap is particularly wide in the lowest-rated slice of securities in the investment-grade category, the report said.
”We’re saying [that group] isn’t investment grade at all,” said Tad Philipp, a Moody’s director and the lead author of the report. “Others are saying it’s all investment grade….”
The report notes that “poor underwriting at the precrisis peak was just eight years ago,” and quotes philosopher George Santayana: “Those who cannot remember the past are condemned to repeat it.”
Those allegedly repeating the past have some tough words for Moody’s—the most active and important CMBS rater—themselves, which basically boil down to (a) nuh uh, and (b) fuck you, you fucking bully.
“They’re still getting paid a lot of money to rate these deals,” said Ken Cheng, of Morningstar Credit Ratings LLC. “It’s easy for them to wag their finger.”