Credit-Rating Agency Reform Languishes

During the period leading up to the housing bust, Standard & Poor’s and Moody’s were giving high grades to mortgage backed securities that were “filled with garbage,” observes industry critic Gretchen Morgenson in the New York Times, helping to usher in the worst financial crisis since the Great Depression. The root of the rating-agency problem was understood to be a “troubling” conflict of interest: The ratings were paid for by the entities whose products were getting rated. That conflict, among other elements of the system were – per Dodd-Frank – supposed to be addressed by new rules to be issued by the SEC. But three years later, Morgenson says, that hasn’t happened.