While the reform bill has gone through, there is still a lot of cleaning up to do. The WSJ talks about firms that can still shop around the ratings agencies, getting the best “deal” for themselves:
In the wake of the financial crisis, the companies that rate bonds have been lambasted for being asleep at the switch and for assigning rosy ratings to questionable mortgage bonds in order to win business. Those ratings companies have made numerous changes, but one thing remains the same: Issuers still “ratings shop” among firms for the most favorable opinions on deals.
The fate of ratings-shopping now hangs in the balance. The financial-regulation overhaul bill passed by the Senate on Thursday would limit the ability of bond issuers to pick firms to rate their securities. But the House version of the bill contains no such provision, and some key lawmakers have raised concerns about the idea. It remains to be seen whether the proposal will survive as the two chambers begin efforts Monday to reconcile their differences. [link]
Quite simply, paying agencies to rate something for you is a clear conflict of interest. This is a huge problem, and poses serious future risks. We shall see what develops, but methinks not too much is going to change down the line. Maybe next time…