Why sue S&P?

It is said that during a screaming match, you never get anywhere.

If that is the case, it is too bad the U.S. government is suing rating service Standard & Poor's for missing the housing market collapse so completely that the firm was giving high marks to bundled mortgage securities right up to the bitter end.

The housing market collapsed and the rest, as they say, is history. Millions of people are out of work due to the financial crisis and economic downturn that may have played out very differently had so much not been invested in that mythological sure bet known as the subprime mortgage market.

The traditional argument for rating services is that their ratings -- good, bad or in between -- are protected by the First Amendment, as they are opinions. The counterargument is equally perverse and that is to say that the banks bundling the mortgages into securities were also paying for ratings agencies to judge them. Since they were footing the bill, the ratings services had a clear profit motive for telling the banks what they wanted to hear, which was that their products were sound.

Essentially, that means the rating services were bribed by lucrative fees to say nice things about mortgages that were handed out to borrowers by banks willing to overlook their own standards for lending. It is hard to imagine a credit rating service failing to examine the product to see whether it was made out of fluff. At that, perhaps banks were feeding credit rating services glossy information about the products they wanted to be rated highly.

S&P isn't likely to own up to the corrupting influence of profit or flaws in their examinations if an admission of guilt means a huge civil penalty. Instead of pushing S&P into a corner, the Justice Department should have backed off and orchestrated an industry-wide, fact-finding inquiry in which it was announced in advance that no penalties would be meted out as long as the parties involved cooperated with the inquiry in good faith.

The purpose of suing S&P should be to ensure that rating services catch the next bubble before it is too late, a much harder but a far worthier pursuit.

In international markets Tuesday, the Nikkei 225 index in Japan lost 1.9 percent, while the Shanghai composite index in China gained 0.21 percent. The Hang Seng index in Hong Kong dropped 2.27 percent, while the Sensex in India shed 0.46 percent.

The S&P/ASX 200 in Australia lost 0.51 percent.

In midday trading in Europe, the FTSE 100 index in Britain regained 0.52 percent, while the DAX 30 in Germany was up 0.1 percent. The CAC 40 in France added 0.93 percent, while the Stoxx Europe 600 gained 0.59 percent.