Claire A. Hill writes,

many brilliant and sophisticated market participants with considerable amounts of money at stake and considerable access to information about the securities and about markets generally made the same mistake the rating agencies did. These instruments were not bought by widows and orphans who might more reasonably have unquestioningly relied on rating agency ratings. Moreover, many of the market participants involved had previously expressed some skepticism about the savvy of rating agencies.

Of course, there was one important player who took agency ratings on faith. The regulators based capital requirements strictly on agency ratings.

Still, I agree with the thrust of her piece, which is that the problem at the rating agencies was a cognitive failure more than a moral failure. They, along with everyone else, believed in the magic of securitization and innovative risk management. I have a forthcoming article in the Harvard Journal of Law and Public Policy on the issue of cognitive failure and moral failure.