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Rating Agencies Emerge Victorious From Regulatory Overhaul

While there are many sectors of the financial services industry that likely feel they were on the losing end of yesterday's 80+ page regulatory reform proposal, there was one true winner- the rating agencies. In fact, the proposal has arguably strengthened their position. The proposal does not address the misalignment of interests between the agencies and issuers, but does recommend less reliance on ratings alone when making investment/credit decisions while remaining silent on encouraging new firms to enter the market.
So, in effect, the proposal recognizes the ratings are worthless and shouldn't be relied on but doesn't want any new competitors who might be slightly more competent to add a shred of legitimacy to the process and capitalize on the quid-pro-quo fee arrangement which will remain intact. It looks like the proposal's subtitle, A New Foundation: Rebuilding Financial Supervision and Regulation, needs an overhaul of its own.
Overhaul Leaves Rating Agencies Largely Untouched [NYT]