Commentary - 05/21/2008

Moody's: Incompetent, Crooked or Controlled By Financial Predators

Posted today on Reuters was this article:
Moody's stock suffers record plunge on rating error

Shares of Moody's Corp fell more than 13 percent on Wednesday, the biggest one-day drop since becoming an independent company in 2000, after the rating agency said a computer snafu resulted in incorrect top ratings for complex debt.

The Financial Times first reported a coding error resulted in wrong "Aaa" ratings for debt known as Constant Proportion Debt Obligations, known as CPDOs.

Uh huh! Sure! The old "let's blame it on the computer" technique. Yep, we just found the bug in the program, after all these years. Sorry, but we're going to keep the money, or at least try. But here's an expert's opinion from that same article:
"Moody's is simply telling the truth slowly, and there's more truth to be told," said Janet Tavakoli, a consultant and president of Tavakoli Structured Finance in Chicago.

"Up until now I thought the rating agencies were incompetent rookies in structured products," Tavakoli said. "Now I'm suspicious that they may be crooked."

Okay, that's takes care of "incompetent" and "crooked." Where's the "simply controlled?"
Agencies like Moody's Corp, McGraw-Hill Cos. Inc.'s Standard & Poor's and Fimalac's Fitch Ratings have been under pressure by investors, regulators and critics for the past year for incorrectly rating subprime mortgage debt.
Well, why would those "Agencies" do something like that? It's my contention that it's because they really are "Agents." They're controlled by the same Top Major Holders who sold the paper promises at the major investment banks. I can't drill to Fitch Ratings' information, but here's McGraw-Hill and Moody's breakdown. The simple fact that Fitch Ratings is out of London connects it closely to Barclays, and being part of Fimalac out of Paris connects it closely to AXA. Is it not interesting just how often AXA and Barclays also show up when you simply drill down one financial level in these major money center banks, too?

Gives meaning to their slogan, Quietly Conquering The World of Finance!

Perhaps this is just another reason that: Sometimes The Dragon Wins

Symbol Name Of Corporation

McGraw-Hill Companies (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
Price (T.Rowe) Associates Inc26,243,6738.18%$1,149,735,314-.--%
Goldman Sachs Group Inc14,710,7784.59%$644,479,184-.--%
Barclays Global Investors UK Holdings Ltd13,724,9114.28%$601,288,350-.--%
State Street Corporation12,083,1993.77%$529,364,948-.--%
Vanguard Group, Inc. (The)9,685,1883.02%$424,308,086-.--%
UBS Global Asset Management (Americas) Inc8,573,9942.67%$375,626,677-.--%
Transamerica Investment Management LLC The Hague, Netherlands8,260,7052.58%$361,901,486-.--%
Sarofim, Fayez8,019,2862.50%$351,324,919-.--%
Bank of New York Mellon Corporation7,309,9412.28%$320,248,515-.--%
Deutsche Bank Aktiengesellschaft (Frankfurt, Germany)6,592,7662.06%$288,829,078-.--%
% of Shares Held by All Insider and 5% Owners:13%-.--%
Top 10 [1.6%] of 614 Institutional Holders Control35.93%-.--%
Percentage of Barclays and "Associates" Control23.10%-.--%
NOTE: T.Rowe Price manages two funds that control 3.92%.
Therefore, the Top 10 Major Holders control 39.85%, and
Barclays/Associates control 27.02% of McGraw-Hill.
NOTE: McGraw-Hill owns and:

Symbol Name Of Corporation

Moody's Corp. (As of 30-Jun-2007)
Top 10 Institutional HoldersShares2007Value2006
Berkshire Hathaway, Inc48,000,00017.98%$2,985,600,000-.--%
Davis Selected Advisers, LP18,888,0357.08%$1,174,835,777-.--%
Barclays Global Investors UK Holdings Ltd13,749,6855.15%$855,230,407-.--%
Marsico Capital Management, Llc12,695,1114.76%$789,635,904-.--%
Goldman Sachs Group Inc11,992,2474.49%$745,917,763-.--%
Sands Capital Management, Inc.10,554,2523.95%$656,474,474-.--%
Baillie Gifford And Company10,153,3483.80%$631,538,245-.--%
Morgan Stanley6,890,4412.58%$428,585,430-.--%
Vanguard Group, Inc. (The)6,602,9682.47%$410,704,609-.--%
AXA (Paris, France)6,134,4772.30%$381,564,469-.--%
% of Shares Held by All Insider and 5% Owners:0%-.--%
Top 10 [1.9%] of 522 Institutional Holders Control54.56%-.--%
Percentage of Barclays and "Associates" Control12.22%-.--%

2008 by Edward Ulysses Cate
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