It boggles my mind that this is allowed:

The U.S. Securities and Exchange Commission may recommend this week that Moody’s Investors Service, Standard & Poor’s and Fitch Ratings be prohibited from advising investment banks on how to earn top rankings for asset- backed securities, according to people familiar with the matter.

This just buggers the mind. These companies were advising investment banks on how to game themselves.

This is not the only change proposed, the SEC is going more generally for transparency in rating:

SEC staff may also propose at a June 11 meeting in Washington that the companies disclose all the data that goes into a rating so competitors can grade bonds even if they weren’t compensated by the underwriter, said the people, who declined to be identified because the rules aren’t final. Moody’s, S&P and Fitch help design securities backed by a stream of payments, making it impossible for them to be impartial raters, a May 2007 academic study by Joseph Mason and Joshua Rosner concluded.

This is Alan “Bubbles” Greenspan’s Randroid utopia of an unregulated market, inside players conspiring to defraud the average investor.