Ratings-agency officials concede that they work with Wall Street banks, even if they don’t exactly shout it from the rooftops. “You start with a rating and build a deal around a rating,” explains Brian Clarkson, Moody’s co-C.O.O. But the agencies reject the accusation that they take an active role in structuring deals.

The problem is that the deals the agencies helped build are falling apart, and the raters are emerging as one of the main reasons. The market for mortgage derivatives is seizing up. Losses on subprime mortgages are far greater than expected. And fears are growing that a credit crisis could spread, spilling over into structured corporate and commercial-real-estate bonds, also rated by the agencies. In late July, Countrywide, one of the biggest players in the mortgage market, reported that it was seeing a sharp rise in defaults—and not just among home­owners with bad credit.

Critics are piling on. Joseph Mason, a Drexel University finance professor, and Josh Rosner, managing director of the independent research firm Graham Fisher, outline in a report how the agencies have become actively ­involved in structuring the subprime-mortgage business. They’ve presented a series of papers to the Hudson Institute, a right-leaning Washington think tank. Separately, a collection of Italian and European Union lawmakers sent a letter to German ­chancellor Angela Merkel suggesting that the E.U. consider breaking the credit-ratings cartel.

John Moody introduced credit ratings in 1909, with railroad bonds. Demand for an independent financial review of railroads was growing because of the industry’s volatility. Moody later moved into corporate bonds and made his mark in the wake of the 1929 stock market crash, when none of Moody’s top-rated bonds defaulted. Over the next several decades, his (and his ­competitors’) ratings became knit into the nation’s financial and regulatory fabric.

Moody’s and S&P dominated for decades, and their business model was straightforward: Investors bought a subscription to receive the ratings, which they used to make decisions. That changed in the 1970s, when the agencies’ opinions were deemed a “public good.” The Securities and Exchange Commission codified the agencies’ status as self-regulatory entities. The agencies also changed their business model. No longer could information so ­vital to the markets be available solely by subscription. Instead, companies would pay to be rated. “That was the beginning of the end,” says Rosner.

It might come as a surprise, but rating credit is a heck of a business to be in. In fact, Moody’s has been the third-most-profitable company in the S&P 500-stock index for the past five years, based on pretax margins. That’s higher than Microsoft and Google. Little wonder that Warren Buffett’s Berkshire Hathaway is the No. 1 holder of Moody’s stock.

McGraw-Hill’s most recent financial report shows that S&P has profit margins that would put it in the top 10. Fitch Ratings, owned by the French firm Fimalac, is a distant third in ­market share but nevertheless has an operating margin above 30 percent, about double the average for companies in the S&P 500.

In 2006, nearly $850 million, more than 40 percent of Moody’s total revenue, came from the rarefied business known as structured finance. In 1995, its revenue from such transactions was a paltry $50 million.