The disastrous bursting of the bubble in housing and the financing thereof has had multiple roots. One has been the social policy, (definitely not a free market economic policy), of promoting, by various measures, availability of mortgage credit to families and individuals who would not normally qualify for it. The basic idea seems to have been to build a broad neo-peasant class of middle income mortgagees attached like their distant feudal forebears to the land except through housing rather than farming. Renters have mobility options that make them less valuable to their communities; i.e., local employers, local bankers and local taxing authorities. Better it is that like dairy cows they be kept on the farm rather than be free to wander off. This is the much touted "ownership society". Lured by the myth of the white picketted "American Dream", few ever stopped to ask who was really doing the owning and who was really being owned.

Looking to the financial side of the debacle, I have yet to see the financial instrument rating agencies receive thier fair share of public criticism. They were a critical link in the creation of collateralized debt obligations and credit swap derivatives, a.k.a., weapons of financial destruction. These instruments, lacking organized markets or track records, were unrateable by normal and prudent standards but were given ratings, generally very favorable ratings, anyhow by the likes of Standard & Poor's, Moody's and Fitch -- companies formally chartered by the SEC as "nationally recognized statistical rating organizations", or NRSROs.

Part of the problem is the business model, adopted in the 70's by the major agencies, by which issuers rather than investors pay for the services of these NRSROs -- a clear conflict of interest. I do not believe this conflict is directly suseptable to a regulatory or legislative cure. Instead, investors should learn from current experience that the NRSROs who operate this way, (not all do), are untrustworthy. I hope bailouts will not thwart their opportunity for gaining from an educational experience. One proposal I can endorse is H. R. 1181, sponsored by Rep. Gary Ackerman [D-NY] and currently in committee. It basically allows the agencies to continue to offer ratings on what they will, paid for by whomever wants to, but requires that the result is not SEC approved unless certain standards have been met. Hopefully this will allow the market to distinguish useful ratings from self-interested hogwash.