It’s official! One of the ratings agencies admits it doesn’t know what the heck it’s doing:
Moody’s Investors Service “did not have any understanding” that MF Global, the failed futures broker, had placed a $6.3bn proprietary bet on the debt of troubled European sovereigns until about a week before the brokerage filed for bankruptcy, despite MF Global’s disclosure of the gamble some five months earlier in May.
The revelation, made in a letter by the agency to Congress obtained by the Financial Times, comes as US lawmakers plan this week to grill executives at Moody’s and rival Standard & Poor’s on what they knew and when ahead of the broker’s collapse on October 31.
Moody’s was apparently under the impression that MF’s sovereign debt position was “client-driven” (whatever that means) and hedged. Of course, it was neither. Pathetic. . .