Hi Tim,

Yes, that is certainly an alternative! Maybe there could even be mutual fund-like organizations where individual investors could band together to pay for some of the ratings by spreading the costs out. Another big problem with the credit ratings is that for the more complex instruments (i.e. structured products), algorithms are used. If you have the wrong algo, then the entire set of products evaluated is evaluated badly. Yikes! Also, with algos, how many people in the world actually understand the machinations of the complex algo? I am guessing very few. Over time we learn to understand the output of the algo, but what about an algo's representation in multiple dimensions and way beyond just three, and even including time? At least with discounted cash flow analysis and common-size statements, and other very basic measures, multiple people can verify and check work. With algos, only after a catastrophe can anyone know there was a problem. Ouch!

Thank you so much for your comment, Tim!

Jason