The big three agencies were quick to react. Fitch managing director Kevin Duignan said in a statement Thursday that his company "will review the complex array of rules, rule amendments and proposals discussed today by the SEC and will provide its perspective when the detailed documents are released."

At S&P, a spokesperson tells GlobeSt.com, "we will continue to work closely with the SEC, market participants and other government officials to promote transparency of our ratings and enhance our policies to meet the needs of investors and the global marketplace."

And Moody's says in a statement that "we look forward to carefully evaluating the SEC's proposals. Moody's has implemented—and continues to implement—a range of measures to enhance the quality, independence and transparency of our credit ratings, and we welcome proposals that would have a constructive impact on the effectiveness of the global credit markets."

In the view of Chris Macke, CEO of Chicago-based General Equity Real Estate, the ratings agencies "should share a substantial portion of the blame" for the collapse of the mortgage-backed securities market. "Their job was to indicate the likelihood of defaults and losses, which they got terribly wrong," he tells GlobeSt.com. "And any professional investor, regulator or member of Congress who says this was a surprise is either being less than truthful or more likely not informed enough to be in those positions. When the people who are rating you are paid by you and are for-profit entities, you'd have to be pretty dim or just not want to see reality to not see that the system would lead to problems in the ratings."

However, Macke adds, "it is also convenient and very misleading to solely blame the rating agencies. Professional investors are responsible in the end for their decisions, including who they rely on for their information. That is what investors are getting paid for."

In a speech at the SEC open meeting on Thursday, agency commissioner Kathleen L Casey summed up her position on regulating the agencies. "Some policy makers want to sanction ratings agencies for inaccurate ratings," she said. "Absent fraud, that is the wrong approach." She argued that greater competition was the best antidote to conflicts of interest in the NRSRO market.

In 2006, in what most say was an effort to increase competition in the rating industry, Congress passed the Credit Rating Agency Reform Act. The SEC says the move provided the agency the authority to impose registration, record keeping and reporting rules on credit rating agencies registered as NRSROs.

Currently, 10 firms are recognized NRSROs. Along with Fitch, Moody's and S&P, they include: A.M. Best Co., DBRS Ltd., Egan-Jones Rating Co., Japan Credit Rating Agency, LACE Financial Corp., Rating and Investment Information and Realpoint LLC.

Also on Thursday, the California attorney general's office issued subpoenas to S&P, Moody's and Fitch, to determine whether the firms violated California law when, as attorney general Edmund G. Brown Jr. put it, "they recklessly gave stellar ratings to shaky assets."

In a statement, Brown's office says "at the peak of the housing boom, these agencies gave their highest ratings to complicated financial instruments—including securities backed by subprime mortgages—making them appear as safe as government issued Treasury bonds."

The statement says that the agencies "worked behind the scenes with the same Wall Street firms" that created the securities." For their work, "the agencies earned billions of dollars in revenues, at a rate nearly double what they earned for rating other financial products."

For example, according to its February 2007 financial statements, Moody's saw revenue of $1.9 billion for the full year 2006, an increase of 18% from the prior year. The Moody's statement notes US structured finance revenue grew by 27% that year, "driven by strong growth in credit derivatives and CMBS ratings, tempered by modest decline in asset backed securities revenues."

Alluding to what it saw as a lack of scrutiny, the statement from Brown's office charges that "the rating agencies either ignored or did not understand or did not understand the risks of the debt they rated." In response to the California action, Duignan asserts that "Fitch regularly provides information to regulatory and state authorities as requested, and we expect to provide similar information in this situation once the request is received."