Moody's (MCO) Egg-Heads Say Ambac (ABK) And MBIA (MBI) Are Junk

Banking, finance, and taxes

Published: May 30, 2008 5:25 am

Moody’s (MCO) primary ratings unit gives Ambac (ABK) and MBIA (MBI) "Aaa" ratings. Those ratings were in trouble, but when the two companies raised capital, they kept their Good Housekeeping seals.

It turns out that Moody’s has a small unit that looks at the credit markets much differently than most of the company’s other analysts do. The little skunk-works is called Moody’s Analytics.

According to Bloomberg, "The official ratings of these companies say the insurers are in great shape; the alternative ratings say they’re in dire danger of defaulting on their debts." That second set of ratings come from within the halls of Moody’s itself.

It will be fascinating to see whether the old line analysts at the ratings agency or the Analystics group. wins this debate. The "official"l Moody’s position could be very, very wrong.

Douglas A. McIntyre

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