Ratings firms like S&P, Moody’s, and Fitch had such monstrously poor track records covering the risks of subprime financial instruments that the SEC may take a hand in regulating them
It’s a good idea. At the heart of the proposed action, the government would take data on past ratings and see how these performed over time. This information would be public. In an open market like this the ratings firms which do poorly are likely to lose most of their business. That would be fine.
So far the ratings firms have been able to avoid normal market forces which would keep track of how well they serve their customers. That may be about to come to an end.
According to The Wall Street Journal "The Securities and Exchange Commission may soon propose rules that require credit-ratings firms to disclose the accuracy of past ratings and distinguish between various products they rate." After the companies let down such a huge portion of their customers, that is only fair.
Douglas A. McIntyre
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