NEW YORK TIMES: …As the company battles those accusations, industry participants say it has once again been moving to capture business by offering Wall Street underwriters higher ratings than other agencies will offer. And it has apparently worked. Banks have shown a new willingness to hire S.& P. to rate their bonds, tripling its market share in the first half of 2013. Its biggest rivals have been much less likely to give higher ratings…
Along with its chief rivals — Moody’s Investors Service and Fitch — S.& P. was criticized for offering top-flight ratings to subprime mortgage securities, which made those bonds appear more attractive to investors before the crisis. The agencies had an incentive to offer higher ratings because banks choose which ratings agency grades each bond. The flaws in the system became apparent when many bonds with the highest ratings ended up plunging in value, inflicting enormous damage on the economy…
S.& P. ran into particular trouble in August 2011 after it backed out of rating a bond being issued by Goldman Sachs and Citigroup because of internal disagreements about how to rate the bonds. It was in the months after that episode, when no banks would hire S.& P., that the company pushed out many of the employees who had been instituting tougher standards, including Mr. Jacob and Mr. Adelson… (more)
