Moody’s incorrectly awarded triple-A ratings to billions of dollars worth of a type of complex debt product due to a bug in its computer models, an FT investigation has discovered. Internal Moody’s documents show that some senior staff within the credit agency knew early in 2007 that products rated the previous year had received top-notch triple A ratings and that, after a computer coding error was corrected, their ratings should have been up to four notches lower. Moody’s said it was “conducting a thorough review” of the rating of the product - constant proportion debt obligations – that appeared to promise investors very high returns with little risk. Read more background here.
