Credit Rating Agencies

WASHINGTON, Sept 14 (Reuters) - Activist hedge fund investor William Ackman said on Monday that credit rating agencies should face more liability for their actions.

"They won't be as profitable, but they'll be a lot more careful," Ackman, who founded Pershing Square Capital Management, said at a conference in Washington.

Ackman said the United States cannot pass meaningful financial reform without changing the way credit rating agencies do business, and reducing reliance on their ratings.
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I agree with Ackman that the credit rating agencies had a huge role in the financial crisis. Investors were relying on these agencies to accurately assess the products that they were investing in. However, I don't know if greater legal sanctions are the answer. Credit rating agencies should be punished, but this can be done by the market. The government needs to allow new credit rating agencies to emerge (currently Moody's and S&P have sanctioned monopolies). Free competition has the potential to force credit rating agencies to be more careful- for fear that if they are not accurate- their customers will have the ability to choose an agency that is.