The validity of the AAA credit rating assigned by ratings agencies has been thrown into doubt.
The validity of the "AAA" credit rating assigned by ratings agencies has been thrown into doubt.
Yesterday a hedge fund report by Gotham Partners Management on FT.com questioned the validity of the rating assigned to insurer, MBIA.
Despite allegations that the report was used to cause MBIA's share price to fall, some analysts have said there are doubts over the rating quality.
A Morgan Stanley spokesman was reported as saying: "The rating agencies are an explicit participant in the guarantors' business model, and, in effect, are now in the awkward position of passing judgment on themselves.
"Accordingly, we believe the ratings agencies may be more likely to respond to market and other forces, as opposed to driving them, in this instance."
S&P added that despite the deterioration in several guarantors' AAA-rated portfolios, losses do not threaten the insurers' financial strength.
The ratings agencies were hit with more bad news when software maker Compuware filed a lawsuit against Moody's Investors' Service.
The suit claims that the agency was engaged in a conflict of interest and made false statements when it downgraded the company's credit rating.
