If someone, including rating agencies, knew something useful about bonds that were not already priced into the market, then that someone could easily be a trillionaire just by buying and selling. Rating agencies are not populated by trillionaire analysts. Therefore, rating agencies and their ratings are not supplying any useful information.<p>So why do rating agencies exist? Three of them -- the profitable ones you hear about -- have licenses from the federal government. Those licenses entitle their ratings to a presumption of validity in front of bank regulators and under pension and investment rules. Yes, institutions that the government backs are entitled to invest or blocked from investing your money, whether you like it or not, based on what the rating agencies say.<p>So they&#x27;re quasi government bodies with the power to defraud you through the banks and pensions you are mandated to use and to grant government bailout guarantees you will pay for in your taxes. In return, they make lots of guaranteed cash and empower the banking system to skim more and more pension funds and investment fees from you.<p>The sad bit is that this actually works better than lots of other systems for regulating banking and pensions that have been tried.