Connecticut Attorney General Richard Blumenthal is investigating a possible conflict of interest created by Berkshire's 19.5% stake in ratings agency Moody's, considering the importance of any ratings provided to Hathaway Assurance by Moody's. The probe is part of a general investigation into conflicts of interest in the credit ratings industry.

This article looks at why the ratings firms should act now to repair their reputations by doing broad based downgrades. It also examines the effect this would have on GSEs and the capital adequacy ratios of many financial firms. It points out the disconnect between the rating's firms own loss projections and the ratings they have on AAA tranches.