"Accept the ratings agencies for what they are: stupid. Don't beat up on [S&P and Moody's] for doing what they have an incentive for doing. Don't curb it, change it." And, at the very least, replace all their employees with particularly, or even marginally, talented cows. I promise you, the effect will be palpable.
Quis Custodiet Ipsos Egan-Joneses?
Let's not stop there with the clichés.* Here's a great one: "never attribute to malice that which can be adequately explained by stupidity." In applied form: your model of all the AAA mortgage CDOs that were maybe not so AAA could be "ratings agencies were paid by banks so they were venal and corrupt and sold the banks good ratings on products they knew were bad." Or it could be "ratings agencies created medium-dumb criteria to make a thing be AAA, and bankers who were smarter than medium-dumb arbed those criteria to make more things be AAA than should have been AAA." The incentives model has good economic theory behind it, and some suggestive evidence; the stupidity model has that lovely cliché but also some evidence, about which more later. But first hilarious contrarian ratings agency Egan-Jones is in trouble: