Analyst blows whistle on Moody's ratings, reports Wall Street Journal

The Wall Street Journal reports that former Moody’s analyst Eric Kolchinsky has reported his concerns about the agency’s CDO ratings to congressional investigators, and is due to give evidence to a congressional committee on rating reform tomorrow.

According the article, the whistleblower wrote to officials of the rating agency accusing Moody’s of issuing a rating on a CDO in January 2009 which it knew to be wrong, and pointed to other examples of overgenerous ratings.

Judging from the Wall Street Journal’s review of the letter, which it claims to have seen, Kolchinsky’s complaints centre on Moody’s change to its CLO rating methodology at the end of last year. Kolchinsky’s argument seems to be that Moody’s should have factored its expected CLO downgrades into the ratings of CDOs which in turn contain CLOs.

A Moody’s spokesperson told the newspaper he could not comment on the January rating but that the firm “takes any allegations of misconduct very seriously”.

Kolchinsky has recently left Moody’s, according to the article.