The unprecedented real estate bubble the nation just experienced was partly created by the credit rating shops that were tasked to value mortgage-backed securities, or MBS. The three large agencies doing that are Fitch Ratings, Moody's Investors Service and Standard & Poor's. The ratings the three arrived at were then attached to MBS issued by Wall Street firms and subsequently offered to investors who were seeking to invest money based on their own risk preferences. Obviously what the large investors world over were seeing made them confident that MBS were sound and worth acquiring, so they bought boatloads of them, stoking the fire under the housing bubble even more.

Las Vegas mortgage recipients, like those in the other seriously mauled areas of Arizona, California and Florida, were caught up in this frenzy and are now paying dearly for it.

Ever since the home loan and real estate market implosion there has been talk about how these ratings actually were sugar-coated and inaccurate, giving investors false impressions on their true value. Naturally the three agencies under scrutiny are adamantly defending their business practices.

Ohio attorney general has now filed a lawsuit against these three agencies on behalf of five Ohio public employee pension and retirement funds, claiming that the MBS ratings were inflated, often giving triple-A scores to mortgage-backed securities that in fact were rather risky. Moreover, the issuers of these bonds themselves, the lovable Wall Street crowd, were paying hefty fees for the ratings, creating an apparent conflict of interest issue. Conceivably the more fees a Wall Street issuer paid, the better an MBS rating would be.

The lawsuit seems to have decent merit now that the housing market has largely tanked and those MBS have lost most of their value, showing that in fact they were not quite triple-A vehicles but rather the high-risk variety. The Ohio attorney general has already filed seven other lawsuits against financial and investment companies since the economy turned sour and has collected thus far $2 billion in damages. This then isn't his first rodeo, so evidently he's onto something everybody should be paying attention to.

It just makes people wonder why Washington mortgage industry regulators are still sitting on the sidelines. This appears to be what they should be keeping an eye on and taking corrective action when needed. Does Wall Street have too much influence there? Well, at least some of the states have taken the initiative seeking to make the marketplace more responsible for its greedy and deceptive actions.