“After the U.S. government settles the case it launched last week against Standard & Poor’s Ratings Services (and settle it most likely will), after the financial community stops sniggering at the hapless S&P analyst who released a subprime version of “Burning Down the House,” after victory laps have been run, words of regret uttered and political brownie points gained, we will still be left with one fundamental issue: How to fix a credit-rating system that failed so badly during the financial crisis, yet remains central to the functioning of global capital markets.

“The ratings industry is plagued by two self-reinforcing problems: an oligopoly dominated by three players—S&P, Moody’s Investors Service and Fitch Ratings, a unit of Fimalac SA —and a business model based on a conflict of interest because debt issuers hire and pay those firms to rate their securities.

“Two solutions, both practical and radical, come to mind: breaking up the Big Three, and making it easier for investors and companies to sue them.

“Academics and practitioners have been discussing such ideas for years, but so far the regulatory response has fallen short.”

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