Rating services typically charge $40,000 to $120,000 for every $100 million in so-called structured-finance securities they rate. For the initial $200 billion portion of TALF, that translates to $80 million to $240 million. If the program is extended to $1 trillion as the government plans, those fees could skyrocket to anywhere between $400 million and $1.2 billion.
The fees for individual firms are often subject to caps.
Critics say Moody's, S&P, a unit of McGraw-Hill Cos., and Fimalac SA's Fitch have made few fundamental changes to the way they assess debt. Officials at all three firms say they have taken steps to avoid a repeat of past mistakes in assigning ratings.
They are still paid for their ratings by the companies whose bonds they rate, a potential conflict of interest. And much-anticipated competition for the three companies has failed to materialize so far.
"Until the rating firms bite the bullet and develop forward-looking signals and methods, it's going to be same old, same old, and their models can be gamed,
" says Ann Rutledge, principal of New York structured-finance advisory firm R&R Consulting and a former credit-rating analyst.