McGraw-Hill, Standard & Poor’s and Moody’s to be investigated

In yet another twist in the financial crisis, A U.S. Senate subcommittee is focusing on whether bond-ratings firms, driven by conflicts of interest, boosted mortgage investments which have since collapsed according to an article in this morning’s Wall Street Journal.

The ranking Republican on the Senate’s Permanent Subcommittee on Investigation, Senator Norm Coleman, told the WSJ in an interview that investigators want to know whether competition among firms led them to issue certain ratings in order to win business from banks.
“We’re going to look at the root causes of this, looking at whether the inherent conflict clouded the judgment of the agencies,” Senator Coleman said.

“We’ve instituted a number of initiatives to mitigate conflicts,” a Moody’s Investors Service spokesman told the paper.

Critics of the firms have accused them of fuelling the credit crisis by wrongly assigning high ratings to structured debt, including debt tied to risky mortgages, in the hope of winning fees from issuers.

U.S. securities regulators on Wednesday delayed action on adopting stricter rules to rein in the credit rating agencies until December 3.

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