Critics Complain of Bond Raters’ Conflicts at US Congress Hearings

Reading thru  Jeffrey R. Kosnett column from Kiplinger  “Beyond bond ratings”, (Oct 7, 2009 )

Ten year ago , the major ratings firms ( Standard & Poor’s and Moody’s)  offered no warnings about  scandals brewing at Enron and WorldCom before the firms collapsed. More recently,  raters missed the troubles at Lehman Brothers, AIG,  and other financial institutions, not to mention subprime-mortgage securities.  Critics  complain at congressional hearings and elsewhere, that ratings agencies are “hopelessly compromised”  by a business model in which they receive fees from the very bond issuers the public expects them to judge impartially. Can muni bond holders really rely on legacy credit ratings?