It's *Still* the Ratings, Stupid
One thing you learn from booms and busts is the importance of gatekeepers -- those professionals who are supposed to safeguard the system and keep markets honest. When gatekeepers are compromised or fall down on the job, confidence evaporates and markets collapse.
That's what happened during the tech bubble of the 1990s, when the lawyers, auditors and equity analysts decided to hop on the gravy train and turn a blind eye to stupidity and corruption. And it happened during the more recent credit bubble, when the rating agencies were seduced by fat fees to assign triple-A ratings to stuff they barely understood. Even today, large parts of the shadow banking system are still not working because investors and lenders still don't know who -- or what information -- to trust.
The dominant agencies -- Standard & Poor's, Moody's and Fitch -- continue to claim that their mistakes were intellectual rather than venal, but an investigation last year by the Securities and Exchange Commission suggested otherwise. So the firms have now moved to try to restore their reputations by adopting new measures to improve the reliability of their ratings. They have also acquiesced to a number of other measures by the SEC and the Obama administration to increase government oversight, prohibit ratings shopping and bring more transparency to the rating process.
After awhile, the catchphrases get terribly redundant, don't you agree?