The ratings agencies have taken a lot of flack for having to downgrade their ratings on many mortgage-backed securities and structured products. And indeed, their business model in which they are paid by investment banks to rate products sold by the banks may lead to a conflict of interest. But if anybody was seriously expecting the ratings agencies to provide definitive pricing and risk evaluations, they were giving far too much credence to the power of modern finance.
To think ratings agencies or anyone else can pin a 'true' valuation or price to a financial asset reflects a fundamental misunderstanding about the nature of financial values.
Too many factors are at work, in particular psychological...
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