his guy had been told by his investment committee to purchase only high-quality bonds in the U.S. for his portfolio. So he invested in AAA-rated securities offered by major investment banks.

Unfortunately, he invested in the wrong AAAs—his were cut to D in only two days during the height of the credit crunch.

so many securities that were rated at or near AAA later experienced massive losses

Issuers of debt now provide 90 percent of the revenues for rating agencies. Naturally, they want the highest rating possible to reduce the cost of issuing debt. So, with the help of investment bankers, companies now go shopping to obtain the highest rating.

In this system, a conservative rating firm would turn out to be an underemployed rating firm

are protected from liability for malfeasance because ratings are deemed "speech" protected by the First Amendment

Firms can knowingly give a security a higher-than-deserved grade, safe in the knowledge that they can't be prosecuted for their "opinions."