What is most troubling about this story is the role played by politics. Congress was not just an observer of the real estate/bank meltdown, it was an active participant that played a role which, with hindsight, we can all agree was both discreditable and corrupt:
Why were both rating agencies still rating FNMA and FHLMC AAA? National politics. A downgrade of the two "government sponsored enterprises" to BB (which the average behavior of the rating agencies would have dictated) might have--after the fact--been argued to be the "cause" of their failure, sure to be condemned by the CEOs of both firms and by senior government officials.
The failure of credit rating agencies to accurately assess the risk of default is an important aspect of the history of the current crisis. If this failure was the result of a reasonable fear of antagonizing a nearly all-powerful Congress, it is one more way in which misguided government policy and excessive government power created the perfect storm
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