Leaders of the House Financial Services Committee are urging the Securities and Exchange Commission to investigate whether Moody’s Investors Service violated federal laws by incorrectly assigning triple-A ratings to billions of dollars of European credit derivatives because of a computer glitch and then not correcting the ratings when the mistake was discovered.
The request was made in a letter to SEC chairman Christopher Cox signed by chairman Barney Frank, D-Mass., and Paul Kanjorski, D-Pa., Spencer Bachus, R-Ala., and Deborah Pryce, R-Ohio.
The letter asks the SEC to determine whether Moody’s failure to disclose and correct the error meets the statutory definition of “material,” among other things, and comes after the Financial Times reported last week that Moody’s wrongly assigned the gilt-edged ratings to billions of dollars of “constant proportion debt obligations” because of a computer coding error. The ratings should have been four notches lower, the FT said.
