Moody's (MCO) and S&P (MHP) will face a lawsuit that they gave inflated ratings to Morgan Stanley (MS) mortgage bonds after a judge declined on Friday not to throw out most of the case. An internal S&P IM conversation seems fairly damning: "That deal is ridiculous," says an analyst. "We should not be rating it." Says another: "We rate every deal." The first says: "It could be structured by cows and we would rate it."