Judge throws out raters freedom of comment argument

Without reading the decision it's difficult to understand what the judge meant by "private". Legally 144A issues (such as CLO notes) are private as well as they are not available to the public, like an IPO. It is a good thing to make sure the rating agencies are held accountable or are at least reminded that they can be held accountable for their ratings. The freedom of speech defense was too much of a "get out of jail free" card.

But this case only went against them because it was a private rating. This is difficult question. The rating agencies have become part of the fabric of the regulatory system via the BIS II risk weights being ratings dependent. They didn't ask for that - in fact I remember it coming as a bit of a shock to them. Arguably the impact of their ratings has become, through no fault of their own, much more relied upon and significant than was ever intended. Against this view are the fees charged (around 400k euro for a CLO when I was structuring them) which was primarily a charge for them to lend the weight of their name to the distribution effort. They were therefore part of the regulatory process, and part of the sales process and were making a fortune from it. Perhaps then they should acknowledge that the old style "opinion" had become outmoded. I dont have a strong view either way as this is complex debate. "It's all the rating agencies fault" is as invalid as "we were excersising the right of free speech" in my view.

Finally, the rating agencies may get the full scrutiny they deserve.... 'it's only my opinion' never really made sense as they are such a large part (explicitly and implicitly) of the regulatory system