Yes but an even larger problem was commoditizing mortgage bundles to such an extent that even an honest rating company would not be able to figure the risk.
Agreed, they should throw it out, but they're also throwing out a paycheck.
FWIW, I was just parroting Nate Silver's section on the financial crisis. He identifies the ratings agencies as one of the several groups responsible for the downfall. In S&N, Silver discusses how the ratings agencies gave their ratings software to the banks, so the banks could "dry-run" their tranches to get the best ratings available.
They were more than just complicit -- they actively enabled the financial groups to game the ratings.
