Moody’s got rid of an executive after finding “inappropriate” and “deeply disappointing” conduct in his staff’s ratings of financial derivatives. It’s yet another black eye for the credit-ratings industry.

The Financial Times, which broke the story in May that forced Moody’s to bring in outside investigators, says on page one that a rating committee “breached internal codes of conduct” in giving AAA marks to debt products called constant proportion debt obligations, which have since lost up to 60 percent of their value.

The paper’s scoop back then reported that a computer error had caused Moody’s to overrate CPDOs, and when it found out its mistake, the company covered it up. The FT says it affected $10 billion worth of securities, while The Wall Street Journal on C1 and The New York Times on C1 say $1 billion.

So the head of global structured finance for Moody’s, Noel Kirnon, is out and other employees may be fired or otherwise disciplined, too. The NYT notes that Kirnon’s exit makes the second top Moody’s executive to leave in as many months.

The NYT says Moody’s found that the employees had considered the impact on Moody’s and/or market participants in their ratings of the CPDO’s.

Critics have asserted that Moody’s and its peers succumbed to pressures from investment banks that were packaging complex and risky debt during the credit boom earlier this decade. The rating firms are paid mainly by issuers of securities, and receive a relatively small percentage of their revenue from investors.

The attorney general of Connecticut, Richard Blumenthal, who has been investigating the rating firms, said Moody’s admission of incorrect debt obligation ratings was “just the tip of the iceberg”…

“This company has far-reaching problems well beyond this one incident,” he said on Tuesday. “This action fails to address those problems.”

World safe for robber barons

Former New York Stock Exchange CEO Dick Grasso won his fight to keep his massive pay package, the Journal and Times say on A1.

After prevailing in a number of court battles, Grasso got New York Attorney General Andrew Cuomo to fold, saying he won’t appeal the latest state-court ruling. That means Grasso will get to keep his $187.5 million in compensation (the Times says he never got $48 million of that), which he got for running what was then a non-profit.

The state appeals court ruled that since the NYSE is now a public company (as of 2006, well after Grasso left the exchange), the state can’t sue on behalf of private shareholders.

Look out below

The NYT on page one says labor-market woes are expected to last well into next year, as the economy faces a bucket of troubles.

“It’s a slow-motion recession,” said Ethan Harris, chief United States economist for Lehman Brothers. “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expecting two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than an acute pain.”

Goldman Sachs expects the unemployment rate to hit 6.4 percent next year and workers are getting fewer hours and their paychecks aren’t growing fast enough to keep up with inflation.

A manufacturing measure of inflation hit its highest level since 1979, the Journal says on A2, while factory activity ticked up—mostly on a rise in inventories, which is bad because it signals they’re not selling as much.

Car crash

The car market is falling off a cliff, as the Times notes in that A1 story. The Journal says on B3 that car sales dropped 18 percent in June from a year ago on poor numbers from trucks and SUVs and Detroit’s share of sales dropped below 50 percent.

A little schadenfreude for the Americans: Toyota sales plunged 21 percent, “an astounding drop”, the Journal says. Still, Ford beat that miserable number with a 28 percent cratering. If there wasn’t enough proof that high gas prices have caught Detroit off-guard, here you go:

Other car makers said they could have sold more vehicles in June but didn’t have enough of the models that customers wanted.

“In some cases we’ve been outright constrained where dealers were just out of cars,” said Mark LaNeve, GM’s sales chief on a conference call. GM estimated vehicle shortages cost the auto industry 40,000 sales last month.

Drop in $5-coffee supply forecast

Starbucks is shuttering five hundred stores in addition to the hundred it announced earlier this year, the Journal says on B1, the FT on page one, and the NYT on C1. About 12,000 decent-paying service jobs will be lost.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.