At last we know who caused the credit crunch. Not irresponsible lenders. Not even irresponsible borrowers. Not the hedge funds or SIVs or other vehicles that no-one understood before last August and which still defy comprehension. No, it was the credit-rating agencies.

As the official recriminations start, it is the rating agencies that are emerging as the scapegoats.

If ever there was a case of blaming the messenger, this is it. Ratings agencies merely give an opinion on the credit worthiness of a company or financial instrument. It is based on analysis but it is only a view – and one that often turns out to be wrong. The people who didn’t see the credit crunch coming failed to warn about Enron and WorldCom too.

But if the agencies make mistakes, the biggest error it to rely on them as though they are infallible. And the biggest perpetrators of the error are the central banks, regulators and governments that insist on encompassing the agencies’ ratings in formal documents. The Basel-II capital-adequacy rules adopted by the EU at the start of last year require banks to use the agencies. The Bank of England is relying on them in its liquidity operations.

It was a change in a credit-rating that allowed Texas Pacific to walk away from its agreement to refinance Bradford & Bingley.

Now the people who gave the agencies their power - politicians across Europe and watchdogs such as the US Securities & Exchange Commission - are blaming them for the crunch and demanding controls.

There are flaws in the rating system – not least because it is the companies issuing bonds that pay the agencies for the rating. But the biggest flaw is to rely on the ratings. Wise investors already do their own independent analysis. It would be better if everyone took the rating agencies with a pinch of salt – an interesting view but not a definitive statement.

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