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Bond Rating Meltdown

Yesterday, I wrote about the "Massive Bond Rating Scam," and how irresponsible bond-rating agencies, shielded by regulation against competition, have contributed to the mortgage meltdown by giving high credit ratings to risky mortgage-backed securities and reckless bond-insurance companies, even while giving poorer credit ratings to reliable borrowers who pose no risk of defaulting. Here's an additional perspective on how bond-rating agencies like Moody's and Standard & Poor's have failed their task. I don't agree with everything in it (for example, the bond-rating agency practices it likens to "payola" imply that payola is always a bad thing, when in fact it can be economically sensible in the music business), but much of it is right on the money, and quite damning. It is ridiculous that borrowers with good credit pay money to have their bonds "insured" by bond-insurance companies (like MBIA and Ambac Financial) many of which are themselves in bad shape.