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Moody’s Investor Service
December 7, 2009 | Leave a Comment
Moody’s Investor Service began in 1900 as the advisory business dream of John Moody, a self-taught entrepreneur who had a knack for journalism, statistics and economics. He began publishing “Moody’s Manual of Industrial and Miscellaneous Securities,” which covered statistics on stocks and bonds from financial institutions, utilities, food companies, mining, manufacturing and government agencies. Moody’s sold his business in 1907, when the stock market crashed, but he returned in 1909, offering investors advisory services and analysis of security values. It was this move that defined Moody’s innovation to become the first person to rate public market securities.
The primary job of Moody’s Investor Service is to provide ratings on stock products, bonds and financial commodities. Investors (either individuals or businesses) who wish to sink their dollars into something usually check the rating system first before deciding how much to invest or where to put their money. In addition to investment advisory services, Moody’s also “publishes investor oriented credit research, including in-depth research on major debt issuers, industry studies, special comments and credit opinion handbooks,” www.moodys.com reports. This information often affects buyer purchasing decisions, such as when to buy a new automobile, when to buy real estate or what sort of investments they should sell off.
Some people have argued for reform of Moody’s Investor Service and other rating agencies like it. “Ratings services still exert significant influence, if only because clients still adhere to old methodologies,” William H. Gross of the Pacific Investment Management Company (PIMCO) told the NY Times in an email. Some argue that a government advisory council should oversee the rating process, since, in the end, it is the government that winds up bailing out these failed financial institutions like Lehman Brothers. Others say the issuer-payer model that was introduced in the seventies needs to be eliminated because it’s a conflict of interest.
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