There are many faces in the gallery of subprime culprits: aggressive mortgage brokers and investment banks pushing mortgage-backed securities out the door among them.

Some have pointed fingers at the credit-rating agencies like Moody's, Fitch Ratings and Standard & Poor's. Their AAA ratings for securities that eventually went bust, along with their reluctance to downgrade until it was too late, provided a false sense of security to investors, and helped create the bubble that burst last summer.

Today, the Securities and Exchange Commission proposed regulations that could vastly diminish the role of credit-rating agencies in financial markets in the long run. The proposals follow measures outlined earlier this month that are aimed at addressing issues of conflicts of interest, transparency, and disclosure at the rating agencies.
    
The latest proposals would water down and rewrite regulations that require some fund managers and banks to consider the assessment of the rating agencies when buying short-term debt and other financial instruments, allowing them to rely instead on other measures for due diligence.
   
"Over the last three decades, we have embedded [the use] of credit ratings into our rule books," said Paul Atkins, an S.E.C. commissioner. "Recent events have awakened us to the unintended consequences of our behaviors.
   
"Credit ratings have become a crutch," he said. "Credit ratings are opinions. They are no substitute for investors making informed decisions."
   
The S.E.C. chairman, Christopher Cox, noted that "events of recent months have had a profound effect on our economy and our markets, and they have galvanized regulators and policymakers... to re-examine every aspect of the regulatory framework governing credit-rating agencies."
         
He acknowledged the criticism by some that the "official recognition of credit-rating agencies... may have played a role in encouraging over-reliance on ratings."
         
"It should go without saying that it should be neither the purpose nor the effect of any S.E.C. rule to discourage investors from paying close attention to what credit ratings actually mean," he said.
     
At the meeting, S.E.C. staffers said they had identified some 44 rules and forms referencing credit-rating agencies, and recommended eliminating any mention of them in 11, changing the wording—in many cases to allow investors to seek alternative means of achieving due diligence requirements—in 26, rules and leaving the language unchanged in just six.
   
Among the most significant proposed changes is a measure that would allow U.S. money-market funds to buy short-term debt without considering the ratings, instead requiring a money-market fund's board of directors to determine that each security "presents minimal credit risks," and is "sufficiently liquid to meet reasonably foreseeable redemptions." No more than 10 percent of investments could be held in illiquid securities.
     
Other regulations would allow investment advisers in certain cases that are currently required to rely on ratings before greenlighting some transactions, to make their own assessments of whether a security meets specific credit and liquidity requirements.
   
The largest significance, however, may be symbolic, some experts say.
   
Jerome Fons, a former managing director of Moody's Investor Services and principal at the investment consultancy Fons Risk Solutions of New York, had been harshly critical of earlier proposals of the S.E.C. to address problems with the credit-rating agencies.

Just last week, he said he was "not convinced there is any real desire to drastically reform or remake the industry."
   
Today, however, "I'm almost eating my words," he said.

"If they go through with these proposals, it's the right direction. I think this will improve the competitive landscape. And if somebody with a better mousetrap comes along, the market will be the decider."
   
But other longtime observers were less impressed.
   
Joshua Rosner, managing director of Graham Fisher & Co., a financial research consultant, said many of the proposed changes discussed so far are largely cosmetic and will do little to restore confidence in the agencies needed to end the credit crunch.
   
"It will take every country's bank supervisors, every state's insurance commissioners, and every country's pension supervisors working to achieve a global reduction in the use of ratings," he said. "It's an admirable goal, but I don't think it can be achieved in the short term."
   
What's really needed is legislation that would change the way the rating agencies operate, he says. When the rating agencies find a structure finance model is not working, for instance, they change the model, but do not go back and re-rate securities graded under the old models.
   
"At this point there is no indication in the U.S. is understanding the issue deeply enough, or looking for much more than" a cosmetic solution, he says.

Many investors, he says, will continue to rely on the rating agencies, because "you have time constraints whether to participate or not in a deal, investors don't have time to look for reams of data," he said.
   
Fons also played down the immediate impact on the business of the agencies.
   
"Their businesses are already hurting," he said. "They're not likely to lobby too hard against these proposals. Right now they need to improve their image and improve investor confidence and lobbying against reform is not the way to do it. If rating agencies can regain investor confidence they will want to use them voluntarily."

Ed Sweeney, a spokesman for S&P, said, "S&P supports the S.E.C.'s efforts to bring greater transparency, stability and confidence to the capital markets, and we look forward to reviewing the proposed rules and providing our comments to the S.E.C. during the commentary period."