Except it isn't just the ratings agencies is it? The banks have been mis-selling and over hyping virtually everything that goes across their desk. Dodgy prospectuses, mis-selling interest rate swaps (http://www.telegraph.co.uk/finance/rate-swap-scandal/9364019...), mis-selling payment protection insurance, rigging municipal bond auctions and the list goes on.
This is before we even wade in to the whole LIBOR scandal. How are you supposed to, as an investor, accurately gauge risk if the independent base rate used to calculate your interest has itself been compromised by the very banks you're buying the investment products from?
I think it would be more valuable to question your assumptions. You have changed the topic and conflated several different issues - it is not the case that doing one thing wrong means doing everything wrong. There's a lot rotten in banking, but selling a bundle of mortgages with varying quality - without misrepresentation of this, and to another financial institutoion - is not morally or legally questionable.
If you really want to talk about the other issues, I find it highly unlikely that 'mis-selling' in this sense means lying. That implication is yet another easy way to join the narratives to sell papers. Small and medium business are generally protected in the same style as consumer purchases - they are not sophisticated investors, and should not even be sold complex products. When they complain about the consequences not being explained to them, they were in fact quite plain in the contract, but they didn't bother to read it properly, or did not understand it. I can understand why we protect them like this, however - same reasoning consumer purchases.
LIBOR - trying to manipulate the market is a crime. Actual effect? Maybe none? Previous investigations and a couple of academic papers found no effect. The Economist also considers the more important thing the 'second type' of wrongdoing - where the ire directed at Barclays is that they initially didn't lie, and then later lied less than everyone else (possible at the suggestion of the government?).
At the stage of 'not lying as much as others', it's getting pretty silly in my view. Much like the financial crisis's beginnings, the public is sold nonsense and hyperbole and cartoon villains. So we focus so heavily on the bankers that we don't really look into mortgage brokers, ratings agencies, government monetary policy, regulators, etc. Conclusion is to velify one group - exactly what the other groups want - without fixing those that set the wrong incentives/hold them accountable. See you in 10 years for the same story.
All my replies have been in response to your "Blaming the banks who sold these seems totally crazy to me. " remark.
I'm afraid I don't find it crazy. I think they deserve an enormous amount of the blame (as I hope I illustrated in my earlier replies) and frankly, I find it vaguely irritating that anyone would try to defend their actions with arguments revolving around caveat emptor.
This by no means suggests I believe they are solely responsible. On this, we can both agree. As far as I'm concerned, the ratings agencies, regulators (pre-crisis at least), brokers, press and government also deserve a large amount of the blame. Irresponsible consumers don't get let off the hook either.
However, regulators (at least on the European side of the Atlantic), government in general and consumers have spent the last 5 years learning from their mistakes and are at least making efforts to correct the situation. The big banks on the other hand have continued to take the piss virtually un-fazed. I'm hoping the LIBOR scandal will now be their watergate moment.
Edit: and when I say "virtually un-fazed" that's charitable. Active denial would be a better choice of phrase. They have heavily lobbied against every single banking sector reform proposed since the crisis began. That takes some hubris. I mean christ, in London up until fairly recently the banks were effectively resorting to blackmail: "make these reforms and we'll have to quit the city and move our operations to a more 'enlightened' jurisdiction".
I think some further case history would help nail your case.
Sadly I don't have it on hand but the assertion above that miss-selling isn't lying is invalid.
Miss selling is just a way to put it across creatively without getting decimated in the press.
Aside from that there are clear cases where the banks lied.
Frankly the only thing that saves them is the inability of other intelligent people to believe that this actually happened. "no it couldn't possibly be that! People are just grinding their axes."
Except every time you hear of the banks in the news they've managed to pull off yet another scam, which just got out in the open.
You know the one simple thing which we should stop offering banks? The option to just pay the fine and get out of a trial.
Barclays got fined - but it's not stood trial - they fessed up, and got off on good behavior.
Only Goldman recently was arrogant enough to believe that they could win a case in court.
This is before we even wade in to the whole LIBOR scandal. How are you supposed to, as an investor, accurately gauge risk if the independent base rate used to calculate your interest has itself been compromised by the very banks you're buying the investment products from?