Earlier, I had written about the fact that rating agencies' methodologies were suspect - "Rating agencies will have to revisit their sovereign rating norms. Currently, it is unthinkable in their models to question the rating of AAA to the US".
Now, there is proof from an insider that the rating agency Moody's was utterly compromised and conflicted. This 78-page Comment on SEC Proposed Rules for Nationally Recognized Statistical Rating Organizations makes for shocking reading, though it confirms what we had always suspected - that conflict of interest permeated all levels of this "Nationally Recognized" rating organization. It is a must-read for those trying to understand how the crisis of 2008 could have happened, and the role of rating organizations in this crisis.