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S&P Singed by Documents

Now it's S&P's turn to get burned by internal documents uncovered by the investigators working for Rep. Henry Waxman's (D-Calif.) oversight committee.

Rep. Stephen Lynch (D-Mass.) displayed an e-mail sent from an unidentified S&P managing director to two of his superiors, subject line: "Competition with Moody's."

The e-mail said that S&P had lost a business deal to Moody's because that agency would ignore certain dangerous factors that S&P would not.

The managing director said that S&P should consider a "paradigm shift" in its ratings policy, implying that such a shift -- or slackening in standards -- would prevent a loss of business in the future.

This gets at the heart of the conflict in the credit rating industry -- trying to maintain both rating standards and market share, as Moody's chief Ray McDaniel just suggested.

Asked to respond to the e-mail, S&P president Deven Sharma first said, "I wasn't there," which tells you it's now a real hearing, and then suggested the e-mail was probably the result of his employees regularly looking at competitors to see how they were rating deals, "to see if we're missing something we should be considering."

Lynch was unsatisfied with the explanation and shot back: "He's not stealing good ideas. He's not being innovative here" and said the S&P managing director was implying his firm should be like "Sergeant Schultz," the clueless prison camp guard from "Hogan's Heroes," famous for his line: "I see nothing!"

-- Frank Ahrens

By Frank Ahrens  |  October 22, 2008; 2:33 PM ET
Categories:  The Ticker  
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