Moody's (NYSE: MCO), known for its bond ratings, reported earnings Thursday that really weren't half bad. Quarterly net income came in at $101 million, or $0.42 per share, down slightly from the $113 million, or $0.46 per share, earned in the same period last year.

Yet Moody's is still one of everyone's favorite companies to hate, including mine. Its role in the credit crisis -- slapping AAA ratings on shoddy assets that banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C) then sold to investors and drowned in themselves -- can make your blood boil.

And the ultimate outcome stemming from those failures, many feel, will pummel Moody's long-term competitive advantage. Trust isn't a word anyone associates with the ratings agencies anymore.

More specifically, why Moody's and other raters are still doing well isn't because clients trust or respect their opinion, but because so many investment firms have touse the services of a nationally recognized statistical rating organization -- i.e., Moody's and a handful of others.

"Nobody I know buys or uses Moody's credit ratings because they believe in the brand," says hedge fund manager David Einhorn. "They use it because it is part of a government-created oligopoly and often because they are required to by law."

This, many believe, is actually what makes Moody's and other ratings agencies so darn powerful. And they're right. It's a government-created oligopoly that gives huge power to those involved.

But it's an oligopoly the government itself has expressed extreme hesitation about, with ratings agency reform a top priority in the financial overhaul.

Never was this more apparent then when congressmen Barney Frank said earlier this summer, "There are a lot of statutory mandates that people have to rely on credit rating agencies. They're going to all be repealed." It doesn't get clearer than that. Continued...