I agree with your intention, but I worry about the consequences: One thing worse than a group of companies controlling credit ratings is one company having a monopoly on controlling credit ratings and being "too big to fail".
What exactly is the best case scenario here I wonder? More credit rating companies equals more competition but greater attack surface and chance of breach, but fewer companies approaches a monopoly situation which isn't good for consumers either. This feels like a lose-lose...
> What exactly is the best case scenario here I wonder?
Pass a law that (a) lets Equifax fail, thereby (i) sending a clear message while (ii) solidifying, in law, the industry's liability to consumers; and (b) prohibits existing credit rating agencies from purchasing Equifax's data, thereby priming the pump for a new entrant. Alternatively to (b), mandate a separation (Glass-Steagall style) between those who warehouse credit data and those who use it to calculate a credit score.
> What exactly is the best case scenario here I wonder?
It seems clear: a transition away from the economic and financial models of the industrial age, which Experian, TransUnion and Equifax - along with the banking cartels and various national reserve banks - represent.
Fortunately, that's happening; the best-case scenario seems inevitable.
I submit that, for example, the explosion in creativity surrounding blockchain tech is evidence that the model embodied by these entities is no longer relevant.
And that these sorts of developments are tantamount to entry into a different age (the "information age" is the typical vernacular) which has a different set of norms than the industrial age did.
and I think people in the Tech Bubble massively over state the importance of "the block chain" as some kind of savior when in reality one of 2 things will happen
1. The Banks and National Reserves will fold the technology into their operations making it apart of the current system. This process is already in the works. This will result in the same system we have today just backed by different technology, but will not lead to the end of Centralized Authority like the vision of block-chain supporters seem to have
2. The Technology will fizzle and die. Which seems unlikely at this point but it is still possible. Security concerns and other aspects still remain high....
However I very pessimistic that block chain will be what brings us to a different age, where these entities are no longer relevant
Outside of the Tech Bubble, there are very few people that even know what a block chain is.
How about we not let them declare bankruptcy and send them to corporate debter's prison instead: hold them accountable by garnishing future earnings until their debts are accounted for. Essentially let them continue operating but let them hang out in the pink sheets for a decade or so as punishment.
I know it's probably a rash idea full of a million flaws and unintended consequences, but sometimes bankruptcy is too lenient of a punishment. And this feels like one of those cases.
> How about we not let them declare bankruptcy and send them to corporate debter's prison instead: hold them accountable by garnishing future earnings until their debts are accounted for. Essentially let them continue operating but let them hang out in the pink sheets for a decade or so as punishment.
The purpose of bankruptcy is to determine how to proceed when a company's liabilities exceed its assets. The company had $10B in assets and $7B in liabilities, a fine added another $5B to their liabilities, now they're bankrupt. Not all creditors can be paid the amount they're owed. Bankruptcy laws exist to make sure what happens next is fair, e.g. each creditor gets 75c on the dollar instead of having the CEO pay all the debts owed to his brother's company first and leaving the other creditors with nothing.
In practice what usually happens in a case like that is that the company files for bankruptcy, sells all its assets --including its name -- to a new corporation that continues operating its business, and the proceeds from the sale are used to satisfy the old corporation's liabilities as much as possible.
Assuming the sale price is fair market value, there is no way to extract any more money from the company than that -- that's what fair market value means. You can't get any more money by forcing them to continue operating. Their future profits are built into the price of what you can sell their operations for. If that amount is less than what they owe, there is nowhere for the rest of the money to come from.
Well, you could eliminate limited liability and go after the shareholders, but if that's the intention then it shouldn't be done ex post facto.
Two things: impose duty of care and accuracy requirements, violation of which can kill the entire business; and restructure the industry to reduce switching costs, so that new rating administrators can come online faster and eliminate TBTF.
Not a big deal, just break it up into 4 smaller companies and let them fight it out. I'm sick of this craven unwillingness to interfere with business' systematic exploitation of consumers.
