October 30, 2019
Regarding the rating firm business models, perhaps a simple way of providing a check against inflated ratings is to encourage institutional investors and index providers (collectively "Institutions") to conduct due diligence on the accuracy of the rating firms' ratings. Currently, there is little incentive for the Institutions to review long-established relationships since it is likely to require a review of the Institutions' compensation arrangements which often are higher than terms currently available in the market. Unfortunately, the public is being harmed in the process.