Regulators could be more lenient on Moody’s investigation than with S&P

by MPA03 Feb 2015

As its case against Standard & Poor’s Ratings Services nears the finish line, the U.S. Department of Justice announced it is investigating Moody’s over the rating of residential mortgage bonds (RMBS) during the run up to the financial crisis.

The ratings company is accused of contributing to the 2008 economic collapse by giving top ratings to shoddy mortgage bonds to win business from Wall Street banks.

It is unclear if the Justice Department will sue Moody’s for fraud like it did Standard & Poor’s Financial Services for engaging in similar practices, but analysts predict the company will face a lesser punishment than S&P.

“Our view has been and continues to be that a Moody's settlement will be for less than what S&P settled for because the emails from S&P were inflammatory, which made the S&P case a stronger one to bring,” Jaret Seiberg, an analyst at Guggenheim, wrote in a report.

Seiberg added that Guffenheim believes tthe government's strategy was to cut a deal with S&P and then use that to pressure Moody's to settle.


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