Is there a market opportunity for completely automatically generated security ratings? Individuals in most developed countries are now assigned a completely computer generated "credit score" (from payment history and applications for credit); is it much more difficult to algorithmically assign an analogous score for a bond or similar instrument?
EDIT: Or is the problem a misalignment of incentives? It appears that investment rating providers are paid by the managers/sellers of the securities rather than the prospective buyer of the securities. This may create an incentive to attract more business by inflating ratings. If prospective investors paid for the ratings, perhaps there would be a different incentive alignment (and also possible opportunities for tragedy of the commons).
EDIT: Or is the problem a misalignment of incentives? It appears that investment rating providers are paid by the managers/sellers of the securities rather than the prospective buyer of the securities. This may create an incentive to attract more business by inflating ratings. If prospective investors paid for the ratings, perhaps there would be a different incentive alignment (and also possible opportunities for tragedy of the commons).