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After Bristol Myers Squibb blamed the credit rating agencies for misleading it on the quality of mortgage-backed auction rate securities, one hedge fund manager remarked, “This is the land of the grownups,” and sophisticated investors should do their own analysis. It was a fair point; any Fortune 500 company–and certainly Bristol Myers–has the wherewithal to analyze any investment. The fund manager is correct to suggest that Bristol executives should not be let off the hook, but wrong to dismiss a situation in which the two principal rating agencies–which have been essentially handed a duopoly by regulators–fail to even come close to properly evaluating the risk in instruments they themselves had a hand in designing.

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