Rating Agencies Attempt to CYA

The rating agencies seem to have the power to make or break the largest financial institutions in the world these days. Case in point - today Moody's downgraded Lehman's debt ratings from positive to stable because of worries over the credit crisis. This downgrade might well create additional pressures on the bank and cause further liquidity issues.

This of course, after the rating agencies (Moody's, S&P, Fitch, etc.) were nearly entirely oblivious to the mortgage problems prior to late 2007. Now they are trying to regain credibility by its caution elsewhere - downgrading as quickly as possible whenever there is a new headline.

The equivalent of an analyst coming out today and downgrading Bear Stearns because of liquidity problems...