On the desk today · Moody's Corporation
Two companies rate the creditworthiness of the world. Moody's is one of them.
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The Gatekeeper
You Can't Fire
In 1900, a self-taught financial analyst named John Moody sat in a New York office and published a book nobody had asked for. He called it Moody's Manual of Industrial and Miscellaneous Securities — a thick directory of statistics on companies and railroads. The first print run sold out within months. Then came the Panic of 1907 — a crisis that wiped Moody out. He came back two years later with something new: a system for grading bonds using simple letters. Aaa. Baa. C. For the first time, an investor could look at a bond and see, in a single mark, whether it was safe. That idea — a letter stamped on a piece of debt — created an industry that now controls the flow of trillions of dollars.
I was reading a bond document last year — a friend had asked me to look at a fixed-income fund. In the fine print, a single clause caught my eye: "In the event of a downgrade below Baa3 by Moody's Investors Service..." The rest described what would happen if Moody's changed its opinion. Loan terms would shift. Collateral requirements would increase. I realized that Moody's wasn't just rating the bond. It was built into the contract.
Most people think of Moody's as an opinion. It's not. It's a lock. Once a company gets a Moody's credit rating, that rating is embedded in bond covenants, loan agreements, regulatory filings, and pension fund guidelines. Changing your rating agency means renegotiating every contract that references it. Nobody does that. The switching cost isn't a fee — it's a legal reconstruction.
John Moody founded the company in 1900. He introduced letter-grade ratings in 1909. Dun & Bradstreet acquired Moody's in 1962 and spun it off as an independent public company in September 2000. Today, Moody's operates two businesses: Moody's Investors Service — the rating agency — and Moody's Analytics, which sells risk data and financial software. Rob Fauber has run the company since 2021 from its headquarters in Lower Manhattan.
The 2025 numbers show you the machine. Revenue was $7.7 billion — up 9%. Both segments grew at the same pace. The adjusted operating margin was 51.1%. Diluted earnings per share rose 21% to $13.67. Net income was $2.46 billion. And Warren Buffett's Berkshire Hathaway owns roughly 13.5% of the company — about 24.7 million shares — making it Moody's largest shareholder since the spinoff in 2000.
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That number — two — is the one that matters most. Two agencies dominate global credit ratings: Moody's and S&P Global. A handful of smaller firms exist — Fitch, DBRS — but when a corporation issues debt or a government sells bonds, the rating that lenders and regulators demand comes from one of those two. The U.S. Securities and Exchange Commission designates them as Nationally Recognized Statistical Rating Organizations. That designation is the gate. Only two agencies stand at the front of it.
The pricing power follows from the lock-in. Moody's charges the issuer — the company borrowing money — for the rating. Not the investor. The borrower pays the gatekeeper. And once you're paying, you can't stop. Every bond covenant, every loan agreement that references your Moody's rating would need renegotiation if you walked away. The cost of switching isn't a cancellation fee. It's a legal impossibility at scale. So when Moody's raises its pricing — quietly, regularly — issuers pay.
I keep coming back to that bond document. The clause wasn't optional. It was load-bearing. If Moody's moved a single letter — from Baa3 to Ba1 — it would trigger a cascade of consequences written into the contract years before anyone imagined the downgrade. Banks hold capital against the rating. Pension funds set allocation limits around it. Insurance regulators use it to determine what a company can own. Moody's opinion is wired into the legal infrastructure of global finance. "Moody's most attractive asset," one observer wrote, "was its most famous investor — Warren Buffett's Berkshire Hathaway — which owned a 15 percent stake." Today that stake is 13.5%. Buffett trimmed it. He didn't leave.
The flywheel runs on debt issuance. Every time a company borrows — a bond, a loan, a structured product — it needs a rating. I find this part elegant: the global debt market keeps growing, and each new dollar needs permission from the same two gatekeepers. Private credit generated 143 rated deals in Q1 2025 — more than double the prior year. Data center financing reached $4 billion in asset-backed deals that same quarter. Every new category of borrowing feeds the same duopoly.
WHY THIS WORKS
The rating is the contract. Moody's opinion is embedded in bond covenants, loan agreements, and regulatory filings. Switching agencies means renegotiating every document that references the rating.
Two at the gate. Moody's and S&P dominate global credit ratings. The SEC's NRSRO designation creates a regulatory barrier that new entrants cannot realistically clear.
The borrower pays the gatekeeper. Moody's charges the company issuing debt — not the investor reading the rating. That means the customer has no choice: to borrow, you must pay for the grade.
Debt never stops growing. The global bond market expands every year. Private credit, data centers, and structured products are adding new categories. Each new dollar borrowed needs a rating from one of two agencies.
What most people miss: Moody's doesn't just rate debt — it is written INTO the debt. A single-letter downgrade from Baa3 to Ba1 can trigger covenant violations, collateral calls, and forced asset sales across thousands of contracts simultaneously. The rating isn't a report you read. It's a switch embedded in the financial system. And only two companies in the world are allowed to flip it.
