20-20 Hind sight

Barron's Critique of Rating Agencies Fails the Test

What exactly is the "service" the ratings agencies provide and get paid for?

We can't expect individual investors and investing institutions to crawl through several hundred pages of disclosures. The ratings agencies get paid very well for performing this task.

Just focusing on one sin, please explain how anyone can fairly rate any debt that is low or "no-doc".

Relying on historical default rate to rate debt is the last vestige of the lazy and simple minded. What happened to the classical "3-C's" of lending? If there is no documentation, "character" and "cash flow" are missing.

Tranching the bundled securities does not reduce the overall risk. Yet the ratings agencies rank the majority of the tranches investment grade.

Another layer of SOX-like rules won't even lock the barn door. I hate to admit it, we need a few dozen attorneys to skin the hide off these rating agencies. Perhaps, just perhaps, they will use *judgement* when the next hot security lands on their front doors.