Why would anyone want to work for a ratings agency now?

Ratings agencies aren't looking particularly hot as a result of Andrew Cuomo's latest investigation into what precisely went wrong in the world of CDOs. As blog Naked Capitalism points out, agencies were either duped or dumb. Neither sounds particularly appealing.

Five years ago, banks were all over ratings agencies. The New York Times claims that, "companies like Goldman offered million dollar pay packages" to poach agencies' best staff, many of whom then ended up working with banks where they liaised with their former ratings agency colleagues on 'AAA' rated CDOs.

"Back in 2004 and 2005, banks were hiring out of ratings agencies so that they could get an understanding of their models," says Alex Tracey of CP Search. "In 2006 and 2007 they were hiring structured credit analysts out of ratings agencies simply because people there were cheap - they were all really, really poorly paid."

Welcome to the future

Needless to say, the bottom has now fallen out of the structured credit ratings business and banks aren't busting to hire agencies' CDO geniuses any more.

Although agencies are still receiving annual payments of up to $50k to report on the performance of AAA rated CDOs which have proven anything but (less than a year after the Abacus deal 100% of the triple A rated bonds had been downgraded), business is now down substantially. In 2006, Moody's earned $667m from rating structured credit products; in 2009 it earned $305m.

At the same time, pressure is on the industry to reform. Regardless of whether the agencies were dupes or dolts, the US Congress is pushing for new ratings agency rules including a clearing house to determine who rates structured finance products.

Meanwhile, agencies have also made themselves deeply unpopular in Europe, resulting in dubious-sounding proposals to create a 'European ratings agency', while Bloomberg has got in on the act with proposals to create an 'automated ratings service.'

And, in agencies' favour...

Despite all this, ratings agencies are hiring. They also offer interesting jobs with (assuming you work with sovereign debt ratings) a ringside seat to the sovereign debt crisis.

What ratings agency don't offer, is high pay. While banks have substantially increased salaries in the front office, employees and recruiters tell us that ratings agencies haven't. Salaries for credit researchers in investment banks can now be double those in agencies; nor do agencies pay big bonuses to compensate.

However, ratings agencies do have some things going for them.

"Candidates working at ratings agencies have often commented to me that the environment there is more cerebral than you get with the pressures of the trading floor," says Adrian Marples at search firm Kinsey Allen. "Agencies are also the ideal place to develop very strong analytical skills, which you can either build in that environment or transfer to the buy or sell side."

Tracey is a little more blunt: "The only benefit for working for a ratrings agency is that it's a stepping stone to getting into a bank or a hedge fund," he says. "If you can't get into banking out of university and you do a few years in a ratings agency, banks and hedge funds will suddenly hire you."