Date
24 November 2017
Moody's is under scrutiny over its ratings to risky mortgage-backed securities prior to the financial crisis. Photo: Bloomberg
Moody's is under scrutiny over its ratings to risky mortgage-backed securities prior to the financial crisis. Photo: Bloomberg

US probing Moody’s over mortgage-securities ratings: WSJ

US authorities are investigating Moody’s Investors Service for issuing rosy grades on mortgage deals in the buildup to the financial crisis, the Wall Street Journal reported over the weekend.

The probe by the Justice Department is still in the early stage and it isn’t clear if it will result in a lawsuit, sources were quoted as saying.

Officials, in recent meetings, have pressed former Moody’s executives on whether the firm compromised standards to win business, the report said. The main focus has been on residential-mortgage deals from around 2004 to 2007.

The probe of Moody’s comes as the Justice Department nears a settlement with Standard & Poor’s Ratings Services, another credit ratings agency, over similar conduct, the report said.

Moody’s and S&P gave triple-A ratings to mortgage deals, which prompted even conservative investors to buy securities backed by subprime loans that later turned out to be risky.

When the housing market collapsed, losses on those bonds spread everywhere and deepened the crisis, costing investors billions of dollars, the Journal noted.

– Contact us at english@hkej.com

RC

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