Disgraced Credit Raters See Windfall in Fed Plan

Moody's, S&P could earn big rating Fed bond deals
By Matt Cantor,  Newser Staff
Posted Mar 20, 2009 10:49 AM CDT
Disgraced Credit Raters See Windfall in Fed Plan
Former Standard and Poor's executive Frank Raiter, right, former Moody's executive Jerome Fons, left, and Egan-Jones Ratings Manager Director Sean Egan, center, testify on Capitol Hill in October.   (AP Photo/Lawrence Jackson)

Credit-rating companies faulted for their role in creating the financial crisis could rake in more than $1 billion in Ben Bernanke’s new plan to prop up the financial system, the Wall Street Journal reports. The Fed is planning $7 billion worth of bond deals, and they'll need the approval of two of the three giant credit rating firms—Moody’s, Standard & Poor’s, and Fitch.

Ratings firms generally charge $40,000 to $120,000 for every $100 million in structured-finance securities they assess, which will mean a tidy profit. The inaccuracy of their mortgage-securities ratings has earned them widespread criticism, though Bernanke says he's "comfortable" they can do the job. If they’re wrong this time, the Journal notes, losses could wind up in the hands of the Fed and taxpayers.
(More Federal Reserve stories.)

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