Isn't it ironic that the credit rating firms (S&P, Moodys, and Fitch) are now downgrading the same financial firms (Citigroup, Bear Stearns, etc. etc.) that they played such a huge role in wrecking?
The sub-prime disaster was a simple fraud: take sub-prime debt (loans to those people who would never "normally" qualify), repackage these loans into a debt instrument, convince the 3 firms noted above that 1+1+1 repackaged equals 5, slap a AAA rating on this debt, and sell it to foreign and domestic investors who considered US debt ratings as "safe" and "trustworthy".
Well, as we all know, 1+1+1 equals 3, and the difference between 3 and 5 is considerable. So, it imploded after making many Wall Streeters filthy rich (the ratings companies didn't do so bad theirselves). Now, the "free market" proponents are calling for a government bailout and I am sure it will happen. Just like the RTC back in the S&L debacle (under the first Bush, I might add), the same people who profited from the disaster in the first place will profit from the "solution". Meanwhile, the US tax-payer picks up the tab.
If the rating firms did not slap the AAA ratings on the debt instruments, the debt could never have been traded and therefore the faulty loan making would have stopped. What a country.
Meanwhile, foreigners have learned that the US financial markets cannot be trusted, and the dollar continues its drop. In fact, one could make an argument that the dollar has been replaced as the "world reserve currencty of choice". By what you ask? The Euro? The Swiss Franc? No my friends, the new "reserve currency of choice" in the world today is a barrel of crude oil (sweet crude if you can find it).