Since I first learned about Minyanville nearly 2 years ago, I've been amazed by the quality of the community. Not surprisingly, many of these high-quality folks have opinions that differ from my own. What makes this community -- our community -- unique, is the respect held for differing opinions. It's a well-advertised belief in the 'Ville that education lies at the cross-section of differing opinions.

With that in mind, I received a letter on June 1, 2009 from another Minyan who, since we share the same first name, I'll refer to as Minyan Dan. Dan read my March 27, 2009 article on the Rating Agencies, called The Ratings Reformation. He disagreed with some, but not all, of what I wrote. He also pointed out a factual error.

Now, I don't know Dan, nor does he know me. But he took the time to obtain my personal address and send me a letter privately, pointing out errors in my article, so as not to embarrass me. It's difficult not to appreciate that, and it's in that spirit that I respond.

Dan points out the following paragraph from my article:

"To have an AAA security be downgraded to AA would be a rare event, and would cause enormous ripples. To have an AAA security actually go bankrupt would be unfathomable. But that’s exactly what happened. From Enron to American International Group (AIG), the highest rating has been tarnished."

He also points out that Enron never had an AAA rating. He's correct. He then suggests that the AIG reference was misleading since it was actually downgraded from AAA to AA in early 2005. I take issue with that point. Any company that requires in excess of $50 billion of government bailouts should never be rated AA, much less AAA. We can argue details, but the point here is the rating agencies got AIG wrong.

Minyan Dan then cites another paragraph from that article:

"Fixed income managers need to rely on themselves, and not the rating agencies. The proof of this couldn’t be greater that Moody’s (MCO) and S&P cannot be relied on for any meaningful independent judgment."

Minyan Dan agreed with the first sentence, but thought the sentence was unfair. He urged me to go to Moody’s website, stating that “Moody’s, like all of us, makes mistakes but I am fairly certain you will find much of their work to be excellent."