When A Computer Glitch Mucks Up Bond Ratings
from the what-do-you-do dept
Interesting story in the financial world, as the Financial Times reported that Moody's, the big name in the bond rating business, may have incorrectly rated certain bonds as Aaa, its highest rating -- given only to a class of bonds that will almost never default. Apparently, the incorrect ratings were due to a computer glitch (always a convenient scapegoat). However, more troublesome is the Financial Times' claim that it has seen documents suggesting that Moody's execs were aware of the error last year and didn't do much to change the incorrect ratings. This is troublesome, as it would be a big hit to Moody's reputation -- which is its biggest asset. Of course, when you rely on a single source (or a single algorithm) to rate bonds, this sort of thing is bound to happen eventually -- and extracting yourself from the resulting mess is always going to be tricky. It makes you wonder if there aren't better ways to rate bonds, that don't have a single point of failure.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: bond ratings, computer glitch
Reader Comments
Subscribe: RSS
View by: Time | Thread
Still
[ link to this | view in thread ]
[ link to this | view in thread ]
Because companies actually care enough to fix those bugs quickly.
[ link to this | view in thread ]
Apparently
[ link to this | view in thread ]
[ link to this | view in thread ]
Conflicts of interest
The fact that other ratings agencies came up with similar bogus ratings casts serious doubt on the "computer error" spin. "Computer error" is the business equivalent of "The cat ate my homework".
It seems more likely that the problem arose because the ratings agencies were paid large sums of money to come up with the "right" ratings.
[ link to this | view in thread ]
bonds and Aaa rate
We Americans are being runed by criminal actions and our government allows it... IRS, FED, and other private agencies have taken over America. I'm ashamed to be American and so powerless to change things. Y'know with all the rubbish going on it saddens my heart.
[ link to this | view in thread ]
[ link to this | view in thread ]