NEW YORK (
Moody's Investors Service
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' s shares sold off sharply again Friday as the credit ratings agency continues to attract widespread criticism over its role in the credit crisis.
Moody's shares finished Friday at $18.85, down 3.7%. Volume totaled 13.4 million for the session, more than three times the issue's three-month daily average. The performance put the stock off 28% since its close at $25.92 on Sept. 16. Shares of
, parent of credit ratings giant Standard & Poor's, have fallen 16% over that time, closing down 2.2% on Friday at $23.67.
The latest problems for Moody's involve a former analyst at the ratings giant who is now accusing it of knowingly giving inappropriately high ratings. The analyst, Eric Kolchinsky, has taken his concerns to Congress and was scheduled to testify at a hearing on Thursday, but the proceedings were postponed after Rep. Edolphus Towns (D., N.Y.), Chairman of the Oversight and Government Reform Committee, said he wants Moody's to respond to the allegations.
Additionally, Rep. Paul Kanjorski (D., PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, said Friday he plans to hold a hearing of his own on Sept.30. Though it's been widely known that Kanjorski was working on legislation to reform the credit ratings process, his announcement may also have contributed to the selloff on Friday.
The ratings agencies are facing legal and regulatory threats linked to the role they played in the boom and bust in structured finance, where banks including
pooled ever-more-dubious home loans into bonds that were sold to investors. Many view the agencies as complicit in the wild popularity of these investment vehicles because they assigned triple-A ratings to many of the securities, dramatically understating their risk.
Now the ratings agencies are on the run. Hedge fund manager David Einhorn, of Greenlight Capital, has been shorting Moody's for more than a year, and began shorting McGraw-Hill earlier this month after Federal District Court Judge Shira Scheindlin threw out the companies' claims that they were protected from lawsuits related to their ratings by the free-speech provisions of the First Amendment. Contributing to the negative sentiment is that
, a longtime Moody's investor, has been selling shares in recent weeks.
Written by Dan Freed in New York