Hedge fund superstar David Einhorn says the credit rating system should be dumped and that he is short the stock of major ratings firm Moody's.

The big rating agencies failed to warn investors of potential problems faced by mortgage- and other asset-backed securities during the credit boom.

Experts agree much of the problem is that the agencies are paid by the firms whose securities they rate.

"The truth is that nobody I know buys or uses Moody's credit ratings because they believe in the brand," Einhorn, who runs Greenlight Capital, said in a speech reported by Bloomberg.

"They use it because it's part of a government-created oligopoly and often because they are required to by law."

Einhorn points out that "even Moody's largest shareholder, Warren Buffett, has said he doesn't believe in using ratings. We are short Moody's."

Dropping the rating system could strengthen financial markets, the hedge fund manager says.

Moody's, of course, begs to differ. Company spokesman Anthony Mirenda told Bloomberg the company's work plays an "important role" in financial markets.

"Moody's opinions are a vital source of information and continue to be widely sought by market participants of all types," he says.

Others agree with Einhorn. Jerome Fons, former managing director at Moody's, and Frank Partnoy, a law professor at the University of San Diego, argued in a New York Times opinion piece that Moody's and the other biggest rating agency, Standard & Poor's, are worthless.

"No one has been more wrong than Moody's and S&P," they write.