David Einhorn, founder of $5 billion-under-management New York hedge fund firm Greenlight Capital, has become a familiar and provocative — if often prickly — speaker at the annual Ira W. Sohn Investment Research Conference. The fabled gathering brings together some of the best investment managers to support a foundation, named for a Wall Street trader who died of cancer at 29, that funds treatment for kids with the disease.

In a prescient speech delivered at the conference last year, Einhorn warned that Lehman Brothers Holdings was overexposed to toxic assets and urged regulators to force it to recognize losses and raise capital. They did not. Less than four months later, Lehman collapsed.

At this year’s event, in late May, the 40-year-old Einhorn called on regulators to dismember the "government-created oligopoly" of credit rating agencies, whose inflated grades for risky variable- and fixed-rate bonds and other fixed-rate instruments helped fuel the crisis by allowing businesses to borrow excessive capital. He bluntly announced that his firm was shorting Moody’s Investors Service, explaining, "If your product is a stamp of approval where your highest rating is a curse to those who receive it and shunned by those who are supposed to use it, you have a problem."

Einhorn recently spoke to Institutional Investor London Bureau Chief Loch Adamson about the ratings agencies and their power to stifle any attempt at reform.

1 Why target Moody’s?

Einhorn: I felt that talking about a pure-play American rating firm would be more interesting to the audience, but I don’t believe Moody’s ratings are worse than those of Standard & Poor’s or Fitch Ratings.

2 Do you buy Moody’s claims that it is taking steps to manage conflicts of interest and improve the quality of its ratings?

What else can it say? Rating agencies’ misbehavior is at the center of the financial problem, and the Securities and Exchange Commission showed last year that this was not the result of innocent mistakes. That said, the basic problems are structural to the credit rating oligopoly and the issuer-pays system and cannot be fixed through symbolic internal steps.

3 If triple-A ratings were apportioned more judiciously, wouldn’t the U.S. government be due for a downgrade?

When giving a triple-A-rated entity too much cheap credit, there is a risk to lender and borrower alike. Sovereign issuers are certainly not exempt from that hazard.