Moody's coding error boosted CPDO ratings -FT

United States -

LONDON, May 21 (Reuters) - A computer coding error led Moody's Investors Service to assign incorrect triple-A ratings to a complex debt product that came to mark the peak of the credit boom, the Financial Times said on Wednesday.

A Moody's (nyse: MCO - news - people ) spokesman declined to comment immediately on the report. The FT said Moody's said it was conducting a thorough review of the ratings.

Ratings agencies are under scrutiny by regulators and politicians over the role they have played in the U.S. subprime mortgage crisis, and face allegations that they assigned ratings that were too high to bonds backed by poor-quality mortgages.

The FT said internal Moody's documents it had seen showed that ratings on so-called constant proportion debt obligations (CPDOs) should have been up to four notches lower, and that the agency had discovered the error in its models early in 2007.

Moody's corrected the coding glitch at that time and instituted changes to its methodology. The products remained triple-A until January 2008, when market turmoil led to hefty downgrades.

http://www.forbes.com/reuters/feeds/reuters/2008/05/21/2008-05-21T075644Z_01_L21551923_RTRIDST_0_MOODYS-CPDOS.html