The sometimes-corrupt agencies rate securities and, in response, markets sometimes ignore these ratings but other times use these ratings to achieve nefarious ends, such as when mortgage-backed securities were overvalued and used to game the financial system.
Reform proposals aim to improve the quality of the agencies and limit their corruption. Imagine honest agencies, overrating securities half the time and underrating them the other half of the time. The underrated occasions still would be ignored while overrated securities still would be used to game the system. The core problem would remain about half of the time.
An alternative proposal would be to remove the legal power of the ratings and require each agency to hire a convicted felon as CEO. Board members would be restricted to men with ten years or more experience as a department store Santa Claus, or eleven-year-old female fans of Hannah Montana. If the agency is wrong some of the time no matter what, and that error has bad consequences, should we not aim to lower the credibility of the agencies rather than restoring it?