The subprime fallout has led to a lot of questions about the role that rating agencies played in it. The two biggest players in the field -- Moody's (NYSE: MCO) and Standard & Poor's are taking a lot of heat right now. Portfolio recently took an interesting look at these agencies. These companies could be in a lot of trouble. Take a look at Portfolio's description of a recent presentation Moody's gave to Russian companies:

But midway through the presentation, Moody's revealed a significant, and ultimately more dangerous, role that the agencies play in financial markets. The slides detailed an "iterative process, giving feedback" to underwriters before bonds are even issued. They laid out how Moody's and its peers help their clients put together complicated mortgage securities before they receive an official ratings stamp. But this give-and-take can go too far: Imagine if you wanted a B-plus on your term paper and your high-school teacher sat down with you and helped you write an essay to make that grade.

The top-two agencies were far too generous in their ratings of debt and also very slow to downgrade when it became obvious that there was trouble. The agencies have become way too involved in structured finance, and are not even close to being independent. Jim Chanos, one of the first to uncover trouble at Enron, has shorted the stock. He said that Moody's is "no longer a referee on the playing field, they are actually playing at this point. So although they are wearing an umpire's outfit, they have a Yankees hat on and I think that's the real problem, in that they are so entwined in the structured finance business."

Here's the question: If investors don't take Moody's ratings seriously, and there's evidence that they shouldn't, how much is the stock worth? What is Moody's worth other than its reputation? Probably very, very little. The stock is down about 1/3rd from its 52-week high but with a market cap of over $13 billion, could have a lot farther to fall as the company's role in the subprime fiasco is further analyzed.

I would argue that, in spite of its extremely high returns on capital, Moody's might be a great short candidate here.