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If bad news comes in threes, the credit rating agencies have filled July’s quota. Warren Buffett’s decision to reduce his stake in Moody’s comes after a high-profile lawsuit against the largest rating companies. Meanwhile, Standard & Poor’s is in a twist over its controversial reassessment of commercial mortgage-backed securities. In fairness, the technical niggle prompting S&P’s reversal of some downgrades might affect just 2 per cent of the bonds it previously placed on credit watch. But see-sawing ratings evidently do not help restore credibility.

Who knows what prompted Mr Buffett’s sale of about 3.4 per cent of his 20-plus per cent Moody’s holding? This week’s proposed legislation to reform ratings is an unlikely culprit. Critics rail that without tackling the conflicts of interest inherent to agencies being paid by issuers, nothing will change. Yet the administration’s approach is also confused. It boosts the agencies’ quasi-official veneer with mandatory registration and increased oversight while espousing the need to reduce investor reliance on ratings.

As it stands, in spite of their many failings, the big three’s stranglehold on the business is undiminished. Meanwhile, much of the financial system – encouraged by regulatory strictures – relies on effectively outsourcing credit work to agencies. The burden of due diligence lies with investors. Oversight of regulated entities should reflect that, with credit ratings’ stature reduced to the single opinion they are meant to be. Encouraging new agencies, and business models, would shake up the business without having to abolish the “issuer pays” model entirely.

Improved disclosure and governance is always welcome. But creating more government oversight jobs tends to block rather than hasten radical change. Mr Buffett has previously maintained that ratings are a good business to be in. Washington has yet to give him reason to change his mind.

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