But regulations did force companies to accept credit ratings from and use rating agencies that, under other regulations, had explicit immunity from liability for bad faith ratings. Even if companies knew the credit ratings were fraudulent, they were required to use them per regulation.

The regulatory framework for credit ratings created a serious moral hazard out of whole cloth, and then actively shielded bad actors from scrutiny. It was a clear and obvious case of regulatory malfeasance, and while the subprime mortgage issue was a manifest consequence of that malfeasance, they did not cause it.

The government allowed this regulatory capture by credit agencies to occur because it directly benefitted the government as well, as they are required to rely on these same credit agencies for their own debt instruments.