> Nobody adjusted the models when they produced incorrect answers because the answers weren't incorrect. They weren't the answers you like in hindsight, but the

> Nobody adjusted the models when they produced incorrect answers because the answers weren't incorrect. They weren't the answers you like in hindsight, but they were correct insofar as the model was vetted & the input was correct. I can't believe you are seriously arguing this. According to you, ratings agencies have no responsibility for the accuracy of their models as long as they fit historical data. By this logic, it's "correct" to rate Greek bonds at AAA right now because they have never defaulted before (this is a simple and completely accurate model that fits past data). Also see: http://xkcd.com/605/ http://xkcd.com/605/ Ratings agencies aren't paid to make models, they are paid to make predictions. When those predictions are wrong, it's on them. It's not reasonable to give a AAA rating that is based on an assumption that housing prices will rise at 10%/year forever, just because they have for the last ten years. Rating agencies aren't paid to be a cultural zeitgeist that analyzes and summarizes the way financial markets are right now. They aren't paid to "go with the flow" and accept assumptions uncritically. They are paid to predict what will happen in the future, and to make especially sure that the most confident ratings (which grannies depend on to make sure they don't lose their retirement) are only given to financial instruments that make the most conservative assumptions. I'm just astounded that you so freely deflect blame for this onto the public. I hope that this isn't the general sentiment inside the financial industry.