Moody’s, the financial ratings firm who’s boss, Raymond McDaniel, testified before Congress earlier this month, along with the chiefs of the two other major ratings firms, about their agencies’ lousy performance in assessing the risks of mortgage-backed securities, named Stanford finance professor Darrell Duffie to its board. (That’s him in the photo, which we found on the professor’s home page.)
Among the documents uncovered by the House Committee on Oversight and Government Reform was a board presentation delivered by McDaniel to Moody’s directors in October 2007. According to the presentation, he told his board: Analysts and managing directors “are continually ‘pitched’ by bankers, issuers, investors.” At times, he conceded, “we drink the Kool-Aid.”
Duffie, 54, has served on the faculty since receiving his Ph.D. from the school in 1984. He is currently the Dean Witter Distinguished Professor of Finance at the Stanford Graduate School of Business. He is the author of Security Markets: Stochastic Models; Futures Markets; Dynamic Asset Pricing Theory; and co-author of Credit Risk, with Kenneth Singleton.
Duffie, who will also sit on the board’s audit and governance committees, will be paid a $75,000 retainer for his services and receive a restricted stock award to be valued at $115,000 on the day it is granted, according to a Moody’s filing today.