I’ve said it before and I’ll say it again: The mess in the credit market is the fault of the rating agencies. Had they not misled investors by giving high ratings to toxic investments, things would be very different today.

The Financial Times has a great article on an “error” found in the rating algorithms of rating agency Moody’s.  Apparently once Moody’s discovered the problem, they decided it was best to keep the investment’s inflated rating instead of adjusting it downward to the correct level.

Here is the evidence, the proof, that ratings agencies have fundemental biases and flaws. The system doesn’t work if they are not honest, much like similar work done by financial auditors.

In order for investor confidence to return, investigations must take place and we need to understand the full extent of their misappropriations. If it is determined that Moody’s or any other agency was aware in advance of the true risk of the structured credit products that had their highest ratings, then they deserve the same fate as Enron’s partner in crime, Arthur Andersen.

There should be no room in the the marketplace for deceitful watchdogs.