The Wall Street Journal article of 12.4.08 hit the nail on the head.
"The SEC is trying to demonstrate action without taking much action."
What the Big Three rating firms have done amounts to the worst kind of white collar crime, selling one's integrity for financial gain. I personally lost a lot of $$$$ in REIT's, in part, because of the new "cash cow" practice of repackaging lower rated mortgages in higher rated paper. A slap on the wrist will do nothing to end this practice.
AT A MINIMUM, THE SEC SHOULD REQUIRE FEDERAL OVERSIGHT BE INSTALLED WITHIN THE OFFENDING OFFICES, TO BE PAID FOR BY THE RATING FIRMS THEMSELVES. These firms are lucky to be allowed to continue in business in the first place.
AT A MINIMUM, the decision makers should go to jail. When did it become legal to defraud innocent pensions and individuals thru crafty manipulation of market data?
THE BOTTOM LINE OF ANY RULES should include a catch-all statement like "Any manipulation of these rules resulting in financial loss by end users, directly attributable to rule deviations by the rating firm, will result in criminal charges," or some statement to this effect. Apparently, some firm directors are so consumed by greed that they fail to attend to the fact that the public depends on fair and accurate ratings.
To allow the rating firms 12 months grace period before disclosure amounts to partnering with the people who manipulate their data for profit. A big "score" could be made in far less time than 12 months and the offending party could be long gone, leaving others to mop up after the blood bath. All firms' rating methods should be public information. Let them compete with great service, economy, with integrity and accuracy. Most banks operate this way. Why should the rating firms be exempt?
MAYBE THE SEC could provide the due diligence and assign the ratings, instead of leaving the fox in charge of the hen house.