Finance History | Moody's — The Railroad Manual That Taught Markets to Read Letters
· 1909
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Finance History | Moody's — The Railroad Manual That Taught Markets to Read Letters
kevin
People treat a credit rating as a score that has always lived on a Bloomberg screen.
The first widely published letter grades were ink in a railroad handbook.
In 1900 John Moody, a self-taught Wall Street statistician, issued Moody's Manual of Industrial and Miscellaneous Securities through John Moody and Company. The first printing sold out within two months.
The Panic of 1907 wiped that first firm out. Moody sold the manual and started over.
In 1909 he returned with Analysis of Railroad Investments and a new company, Moody's Analyses Publishing Company. The book assigned letter ratings to railroad bonds so a reader who would never see the rolling stock could still rank the credit.
Moody later wrote that the idea was not wholly original. He pointed to earlier rating experiments in Vienna and Berlin. What he added was a public manual a clerk could buy and use.
The scale that followed, Aaa down to C, is still the grammar of the bond market. Aaa means the highest quality in Moody's system. C means the lowest, usually already in default.
The firm became Moody's Investors Service in 1914. Dun and Bradstreet bought it in 1962. Moody's Corporation was spun off as its own listed company in 2000 and sits in the S&P 500 as MCO.
The present New York home is 7 World Trade Center at 250 Greenwich Street. The glass tower that stands here opened in 2006 on the site of the earlier 7 World Trade Center, which collapsed on 11 September 2001.
Pin the public sidewalk. The ratings rooms are not a visitor attraction.
What a walker can see is the address where the letter-grade business now works. The mechanism that started in 1909 is unchanged in one respect: a stranger still pays for a published opinion about whether a borrower will pay.
Photo: Sweeneyr, CC BY-SA 3.0, via Wikimedia Commons.
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