Cracking Down on Ratings Agencies

This is a very important step, and hopefully something like these proposals will go forward. As with the collusive accounting practices that were a major part of the Enron scandal, the principal-agent problems with the ratings agencies are indeed severe — it’s not just that the ratings agencies have their own independent interests, but that those interests are intertwined with the companies they were allegedly scrutinizing. Which means stronger regulation is essential. (And speaking of corporate “free speech,” I’m amused by the recently rejected argument that the First Amendment immunizes credit agencies from being sued for deceptive ratings. Does the First Amendment mean that laws against perjury are illegal too?)