Barry Ritholtz optomistically says he suspects we are “FINALLY seeing the beginning of the endgame for the rating agencies.”
We wish that were true, but… no. The model won’t change.
Let’s remember why real quick:
- The idea that ratings agencies over-assigned AAA ratings because they were paid by the issuer has been debunked. There was a huge demand for AAA-rated securities, and if anything they were satisfying buyer, not seller, requirements.
- Regulations spurred the need to create and acquire AAA-rated securities, and these regulations aren’t likely to go anywhere.
- As long as you have these regulations, you need an oligopolistic system, otherwise any-old firm could come in and call something AAA.
- Issuer-pays must remain, because there’s no other business model. You can’t make money selling research to buyers — basically nobody does on Wall Street — and like any other media/publishing companies, they’d find the paid content model to be extremely difficult in this digital age of instant distribution.
So, lawsuit away! Nothing’s going to change.
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