Pfizer, MBIA, and the Ratings Agencies

This is a pretty thought-provoking article from Mish's Global Economic Trend Analysis blog: http://globaleconomicanalysis.blogspot.com/2008/02/mbia-maintains-highest-rating-pfizer.html.

The only reason I can see for not downgrading MBIA while Pfizer gets the axe is simply because of the fallout that would take place if MBIA, which truly relies on its credit rating to operate, was no longer able to insure bonds (ignoring the fact that they have so little cash that they probably couldn't cover many defaulting bonds at this point anyway). But is trying to forestall a potential blowup really the best thing for the economy or all those MBIA-insured bonds? After all the lack of insight/intelligence/due diligence on the part of the ratings agencies when it came to CDOs, I would think that it would behoove them to become ruthless in their ratings, to show that they really actually do what they claim to do.

Something drastic needs to happen with the way ratings agencies are currently run, since they seemed to have not learned anything from the whole CDO mess. If investment banks are required to have so-called "Chinese walls" in place to prevent improper conduct on the part of analysts and traders, maybe something similar should be instituted with the ratings agencies where those doing the actual analysis and rating are unaware of how much the agency has been paid by the company seeking the rating, or if they have paid at all. It may be hard to implement something, but since the ratings agencies seem unable to handle their responsibilities, as evidenced by the Pfizer/MBIA ratings, something should be done.