Coruscation

the e-mail messages you should be focusing on are the ones from employees at the credit rating agencies, which bestowed AAA ratings on hundreds of billions of dollars' worth of dubious assets, nearly all of which have since turned out to be toxic waste. And no, that's not hyperbole: of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent -- 93 percent! -- have now been downgraded to junk status.

Krugman illustrates the integrity of NRSRO (Nationally Recognized Statistical Rating Organization) which look at new evidence, and in light of new evidence are willing to revise their ratings. And Krugman notes the difficulty in monetizing intellectual property in the Internet age:

What we really need is a fundamental change in the raters' incentives. We can't go back to the days when rating agencies made their money by selling big books of statistics; information flows too freely in the Internet age, so nobody would buy the books. Yet something must be done to end the fundamentally corrupt nature of the the issuer-pays system.