SEC keeps credit ratings game rigged in the US - Moneylife Personal Finance site and magazine

The SEC brought a civil case against a tiny, iconoclastic ratings agency called Egan-Jones accusing it of filling out forms wrong. The allegations seem especially paltry when compared with the disastrous performance of the ratings agencies that matter—Moody’s and S&P
The Securities and Exchange Commission (SEC) seems to think that it has done a much better job of investigating financial crisis wrongdoing than the Justice Department. And it’s true.
But it’s like being proud that you're the ‘Dumb’ of “Dumb and Dumber.”
A case the commission filed last week epitomizes a lot of what’s wrong with the agency, even under the supposed overhaul by its chairwoman, Mary L Schapiro.
The agency brought a civil case against a tiny, iconoclastic ratings agency called Egan-Jones, run by the outspoken Sean Egan, accusing it of, well, essentially filling out forms wrong.
Before the SEC charges, Egan-Jones was best known for two things: having made some bold calls about shaky credit prospects and having a business model that was different than that of the big boys—Moody's Investors Service, Standard & Poor’s and Fitch. Mr Egan’s outfit gets paid by the users of his ratings; the oligopoly gets paid by the issuers whose debt is going to be rated.
You don’t need to be a hedge fund quant to see the conflict of interest: the more ratings, the more profits to the ratings agencies, so the temptation is to be extra lenient. And, boy, were they.
Mr Egan wasn’t shy about pointing this out, often through media appearances. To be honest, one wondered how much was showmanship and how much was deep research.
But the world needs his brand of punditry, especially on Wall Street, where the uncorrupted are too afraid to speak out. Mr Egan has been prescient on some important calls about declining credit prospects, ahead of both the European financial crisis and the American mortgage and structured finance bubble before that.
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