August 16, 2007 (LPAC)--As Europe's banks tank along with the subprime mortgage market, the European Commission announced that it will open an investigation into how credit ratings agencies such as Standard and Poors, Moody's Investors Service, and Fitch Ratings operate. European governments and the EU are charging conflict of interest, because these rating agencies --which rated subprime mortgage paper as Triple A until but a few months ago-- are paid by the banks and institutions that they rate for credit-worthiness.

Now, faced with the threat of government investigations, the agencies are trying the defend themselves from mounting legal prosecutions with the remarkable claim that their ratings are merely opinions, covered in the United States by the Constitutional right to free speech!

Now, like Enron's accountants before them, the noose is tightening around them, however. "If the rating agencies believe this is going to be business as usual, they are very wrong," a European Commission official told the Financial Times, in an interview published front page today. "The securitized subprime mortgage market would not have grown to the extent it did without the favorable ratings given by some agencies." The threat of government regulation of these agencies has even been raised, as one remedy.