No, securitization is a sound method. We can make AAA securities from subprime mortgages, just like we can filter clean water from a cesspool. The question is how much "clean" water we can get. Clearly not as much as the rating agencies thought.
Yes there is a problem with the agencies and how they operate. Government regulations give the agencies a huge amount of power. They can force a company into bankruptcy like what they did with Lehman by downgrading the bonds that they had initially graded AAA to junk. That forces Lehman to put up more capital in a vicious cycle of destruction. Yet the ratings agencies aren't punished for making huge and substantial mistakes. It doesn't matter how wrong they are or were, they get to continue on. Where is the incentive to be right? Where is the incentive to do their job?
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