rl78 makes a good point about the willingness of the current government to prosecute the ratings agencies for criminal fraud. It just is not happening.
The other point to note is that prior to this legislation, under the securities laws as currently interpreted by the Supreme Court, ratings agencies were effectively immune from private securities litigation on behalf of bondholders who relied upon those ratings and were defrauded. This legislation makes them liable.
What is also overstated in the original article is the degree of liability. This is not a strict liability statute - ratings agencies are not liable for giving AAA ratings when they "really should have been" AA ratings. But if a rating agency gives AAA ratings to what were effectively junk bonds, then, hell yes, they should be liable, whether its because of a "mistake" or whether it is intentional. Investors rely on these ratings, the ratings agencies make a lot of money off those ratings, and they need to be liable for their ratings.
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Re: fraud
rl78 makes a good point about the willingness of the current government to prosecute the ratings agencies for criminal fraud. It just is not happening.
The other point to note is that prior to this legislation, under the securities laws as currently interpreted by the Supreme Court, ratings agencies were effectively immune from private securities litigation on behalf of bondholders who relied upon those ratings and were defrauded. This legislation makes them liable.
What is also overstated in the original article is the degree of liability. This is not a strict liability statute - ratings agencies are not liable for giving AAA ratings when they "really should have been" AA ratings. But if a rating agency gives AAA ratings to what were effectively junk bonds, then, hell yes, they should be liable, whether its because of a "mistake" or whether it is intentional. Investors rely on these ratings, the ratings agencies make a lot of money off those ratings, and they need to be liable for their ratings.