Will the Ratings Agencies Ever 'Get It'?

Can there be any doubt that the ratings agencies' business model--and judgements--are fundamentally flawed? Here is an article in Bloomberg by Jonathan Weil on 11 December 2008 about their continuing saga, this time involving a great and legendary company--GE--that unfortunately is having its share of problems in the financial sector, a major component of the business. While the ratings agencies have said 'We may have made some mistakes in the past' (Duh!), they continue to give GE their highest AAA rating. Meanwhile, an independent rating agency, not encumbered by payments from the companies being rated, assign a rating 6 levels below AAA.

At what point are will the regulators mandate: 1. A new business model for rating agencies; 2. Generally accepted rating standards and be held accountable to those standards; 3. Consequences for poor or clouded judgment; or 4. Revoke their charter and power from the marketplace?

As I noted, GE is a great company and will see many better days as it works through the crisis. But business and society are ill-served by the inability or unwillingness of the rating agencies to come clean and engage in serious reform.