Moody's, S&P and Fitch Agree to Deal on Fees

Los Angeles Times (06/06/08)
Wall Street's three major debt-rating companies--Fitch Ratings, Moody's Investors Service and Standard & Poor's--have all agreed to adopt a new fee structure aimed at reducing their incentive to assign favorable ratings on securities backed by subprime home loans. The trio agreed to the change under an accord with New York Attorney General Andrew Cuomo, who had launched a probe to determine the origins of the subprime debacle. The deal applies only to debt backed by U.S. subprime and other so-called non-prime home loans. The changes that will be implemented over the next six months entail the three rating companies agreeing to require investment banks to provide more detailed data on packaged loans before a rating can be issued, to disclose the standards used to make ratings and to charge for their initial reviews--all of which will reduce their incentive to give a favorable grade.