Many question the power of the credit rating agencies since the sub-prime crisis when the mortgage bond AAA status proved erroneous, and recently, when U.S. bonds lost AAA ratings from Standard & Poor’s.
The federal government gives the raters a monopoly and then criticizes their work. Some solutions make little sense, Such as making rating agencies liable for any errors in judgment. Which is great for lawyers and is bound to get those companies out of the business.
Actually, banks and large investment companies already do their own investigations of credit risks they deal with.
What about more competition as a solution? Allowing any company with qualified analysts to practice would help. Right now, the government has permitted only a few to operate in this area. ( See the Earl J Weinreb NewsHole® comments.)
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