Krugman identifies another corruption of our vaunted, innovative financial system:
[Debt rating] was a system that looked dignified and respectable on the surface. Yet it produced huge conflicts of interest. Issuers of debt — which increasingly meant Wall Street firms selling securities they created by slicing and dicing claims on things like subprime mortgages — could choose among several rating agencies. So they could direct their business to whichever agency was most likely to give a favorable verdict, and threaten to pull business from an agency that tried too hard to do its job. It’s all too obvious, in retrospect, how this could have corrupted the process. [Emphasis added.]Since Enron corrupted Arthur Andersen by applying the leverage of money to built-in conflicts of interest, it has been obvious that it would be impossible for any alleged watchdog paid by the watchees for its watching to resist payment from the same parties not to watch. Free market competition guarantees it.
Krugman's hardly ever slow on the uptake. Maybe he just didn't have any public statements to point out, proving that he had noticed long ago.