Coming to the Defense of the Credit-Rating Agencies

Just days after Connecticut's Attorney General filed a lawsuit claiming that Wall Street's credit-rating agencies conspired to give low ratings to municipal bonds, and just hours after Fitch announced it would change its ratings system, it may be illuminating to listen to what the defenders of the ratings agencies say.

Unfortunately, the defenders seem to be limited to folks in the credit-ratings industry.

One of those defenders is, predictably, the chairman and chief executive officer of Moody's. Raymond McDaniel noted, quite correctly I might add, that "asserting that a rating scale is wrong is the equivalent of saying that measuring distances in centimeters is wrong or measuring in inches is right."

S&P also responded -- correctly -- that filing a lawsuit to change how anyone "judges" or "values" an investment is almost certainly a violation of the First Amendment.

But what I'm not seeing are any institutional investors, regulators, politicians or other major players issuing statements in support of the industry and its right to operate as it sees fit.

And that absence of support has to be the result of the enormous anger aimed at the agencies for failing to warn us about risks in the mortgage-backed and other derivative markets.