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Jeffries, Egan Jones in Credibility Title Bout

When asked about Jefferies's Monday letter, Sean Egan said in a phone interview with TheStreet that the ratings firm didn't have a response. Of Egan Jones ratings, he said "we are known for our timely, accurate ratings." According to an email obtained by Bloomberg, Egan Jones will provide a response to Jefferies letter later this week.

With the ratings notices, the TV appearances and Monday's letter, it's clear that a war of words has turned into a battle. At a time of widespread market fear and when many bank shares fall to 2011 lows, the stakes are critically high.

As of Monday trading, the letter seems to have stabilized shares - but they're still over 20% below the levels of $12.27 a share prior to Egan's ratings downgrade. After falling more than 4% in early trading to $9.60, Jefferies erased earlier losses and gained nearly 2% to $10.27 a share in afternoon trading. Meanwhile, the KBW Bank Index (BKX) is down over 2% to $36.47.

In its most recent quarter ended in August, Jefferies earned $68.3 million in profits, a slowing on earnings from earlier quarters in the year. About Jefferies's fourth quarter ending in November, Handler wrote that the bank "expect[s] to record operating results for our fourth quarter that, although not where we want them to be, will be profitable and stronger than our third quarter." The investment bank has come out of the crisis on track to earn over $200 million in annual profits after posting a 2008 loss of $540 million.

Whether the letter will mirror failed jabs at manipulative shorts during the demise of Lehman Brothers and Bear Stearns, or if it will be seen as a stabilizing blow against Egan Jones's analysis and its reputation is still to be seen.

For second-sized players in Wall Street's high stakes investment banking and securities trading businesses, the battle among lean mean welterweights, now has a heavyweight dimension.

-- Written by Antoine Gara in New York.
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