Ratings Agencies Fraud Case

http://dealbook.nytimes.com/2013/11/11/suit-charges-3-credit-rating-age…

It's pretty easy to be cynical about the government prosecuting ratings agencies over some of the bad calls they made leading up to 2007/8 financial crisis. It's something else when other players in the market are going after them. As I'm sure most of you are aware, liquidators have filed fraud suits against the ratings agencies, and I'd like to open up the topic for discussion. Do the liquidators have a case, are the charges "without merit" (Moodys), or is the truth somewhere in between the two narratives of the warring factions?

I'm pretty vocal about laying the blame of a lot of the mis-rating of structured mortgage products on the ratings agencies. It's one thing for a bank or trader or someone else to oversell something. It's kind of what they do and even John Mack said "We can't stop ourselves." I also understand that ratings agencies have to play nicely so they get ratings business. But it's not like there's a ton of competition for agencies to worry about considering a handful of companies dominate the entire practice. Recovering from the reputational damage that fraud ushers in is an uphill battle, and the the liquidators are pretty motivated to raise as much money as they can for the shareholders. I'm guessing that they smell blood and have held off on initiating this until they had a pretty good case.

I don't think any of us are suprised by this, but I'm curious: what do you think?