Zacks Analyst Blog Highlights: Moody's, McGraw-Hill, Bank of America, HSBC and American Express

Chicago, IL – June 23, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Moody's (MCO - Analyst Report), McGraw-Hill (MHP - Analyst Report), Bank of America (BAC - Analyst Report), HSBC (HBC - Analyst Report) and American Express (AXP - Analyst Report).

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Here are highlights from Monday's Analyst Blog:

Obama Plan Spares Rating Agencies

President Obama's regulatory reform plan appears to be a good beginning for restoring the confidence in the financial system, but there are many areas where it does not go far enough, like the revamp of the rating agencies. Despite their significant role in the credit crisis, the impact of the proposed changes in the plan on rating agencies is minimal.

The rating agencies play a crucial role in the capital markets by rating everything from simple corporate bonds to complex structured investments like mortgage backed securities. Institutional investors rely heavily on credit ratings while deciding their purchases. Banks are also required by law to take ratings into account when investing in bonds.

Top rating agencies like Moody's (MCO - Analyst Report) and McGraw-Hill's (MHP - Analyst Report) S&P Rating Services and Fitch Ratings are paid by issuers whose securities they rate, thus creating an incentive to assign high ratings in order to win more business. This system creates a conflict of interest and at times companies are even threatened with lower ratings if they don't pay particular ratings agencies.

A Kinder Credit Card Industry?

This shift was a result of the credit card reform bill that was signed by President Obama in late May 2009, which moderates some of financial service industry's ability to raise rates on existing balances and prevents certain automatic fees.

The practice quietly began during 4Q09, but had been expanded as the recession continued. Some of these credit card companies have revised their internal guidelines to give their "front-line" employees the power to make deals with consumers.

While Bank of America (BAC - Analyst Report), HSBC (HBC - Analyst Report) and American Express (AXP - Analyst Report) prefer to use a case-by-case approach, other companies are taking a preemptive approach and calling their customers first.

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