By Oh Young-jin
Assistant Managing Editor

The other day, I stumbled upon an article in the Maeil Business Paper about how Korean officials lobbied Moody's delegation, which in turn led it, one of three global rating agencies, to upgrade Korea's national credit level.

The article said that officials at the Ministry of Strategy and Finance paid particular attention to the menus of the dinners served to Thomas Byrne, senior vice president of Moody's who visited Korea to review the nation's credit rating, and pointed out that his wife is Korean.

In another part of the article, it said that Moody's used an analyst born to Korean parents to ferret out weak points in Korea's banking system but officials at the Financial Supervisory Service (FSS) persuaded him, contributing to the rating upgrade.

Since I couldn't get hold of either Byrne or the Korean analyst for fact checking, if they find my column inaccurate and the inaccurate parts are mutually verified, I am willing to use my column as a disclaimer.

My first question is whether the Korean government paid for the dinners or any other expenses incurred from the Korean visit by Byrne and his associates.

I think that, if their stay was in any way paid for by the Korean government, it would amount to a dent in Moody's credibility.

Of course, I am happy to see Korea upgraded in Moody's ratings because it signifies an enhanced level of stability, entailing lower interest rates for overseas borrowings and a rise in the number of inbound tourists. Besides, I agree with the people who say that those agencies are stingy with rating emerging economies and overly generous to western countries. The case in point is their ratings of the troubled economies of PIGS ― Portugal, Ireland, Greece and Spain.

However, this doesn't mean that I want an upgrade for my country or any other country for any other reasons than valid ones.

In other words, Moody's is required to vet the economic health of a country or an organization most fairly and accurately because investors use their ratings as a key barometer in deciding whether or not to put their money in that country.

Being wined and dined on the tab of those who are vetted does not help its credibility. Of course, I want to believe that Byrne held on to his company's rules of conduct dealing with such a delicate situation or used his long experience to avoid any conflict of interest.

Or he may claim that he is professional enough not to let free dinners or gifts influence his judgment. While this is purely hypothetical, not implying Byrne received gifts or was taken to an expensive dinner, to third party observers, it could still be seen as a form of a bribe.

This conventional wisdom has its cost-to-effect theory behind it.

For example, let's say there's a lucrative government construction bid that draws a lot of bidders. A bidder takes the contracting officials to an expensive bar and discovers a pivotal piece of information, and thanks to that, they win the deal. To the winner, what they spent on entertaining the officials is money well spent because they were selected for the project.

With a dose of hyperbole, Moody's has a superior position over Korea in its role of rating giver because an upgrade can save Korea a great deal of money.

Thus, Byrne would be running the risk of compromising his credibility and that of his firm, if he is seen as being too close to those he is supposed to vet.

I would not have raised any issue over Byrne's visit or any lobbying that might have taken place, if we weren't still suffering from the aftermath of the latest financial crisis.

As was well reported, the rating agencies can't escape blame for helping trigger the Wall Street meltdown. They failed to properly evaluate the health of firms but in a way jumped on the bandwagon for higher fees. In a way, these agencies have an inbuilt flaw that prevents them from being the perfect watchdogs, because they are paid by those who they check out.

I just hope that the rating agencies won't turn into bigger versions of Arthur Andersen, which collapsed for being too close to Enron, the energy firm that it was hired to audit. Meanwhile, I am waiting for Byrne to respond.