>Not everyone does due diligence. I don't think it makes sense for every single person or company considering investing in Company XYZ to do their own, separat

>Not everyone does due diligence. I don't think it makes sense for every single person or company considering investing in Company XYZ to do their own, separate due diligence on XYZ. The information they each would uncover is the same. It's a lot more efficient to pay a ratings agency to rate XYZ once. The tricky part is getting the incentives right so that the ratings the ratings agency produces are accurate. (There already is a reputational risk incentive pushing towards doing this the right way, but as we saw in 2008, there are other incentives pushing the other way, and they might often be stronger.)