The ratings companies have profited from their quasi- regulatory roles with revenue for their grades at all-time highs as borrowers take advantage of record-low interest rates. Revenue at S&P grew to $2.28 billion in the year ended Sept. 30, up more than 20 percent from $1.89 billion a year earlier.

Moody’s Corp. is expected to raise its prices by 4 percent this year, Chief Financial Officer Linda Huber said at a September investor conference. The New York-based firm enjoys “incredible” pricing power since the ratings business is a “natural duopoly,” Warren Buffett, the company’s largest shareholder with an 11.3 percent stake, told the Financial Crisis Inquiry Commission in 2010.

Shares of Moody’s have climbed 46 percent this year through yesterday to $73.33, while McGraw Hill Financial has advanced 30 percent to $71.23. The S&P 500 Index has gained 25 percent this year to 1,782. S&P’s parent rose 1.5 percent today to $72.29, an all-time high.

S&P leads with a 44.8 percent market share for ratings, Moody’s holds 38.25 percent and Fitch, jointly owned by Hearst Corp. and by Fimalac SA, is at 13.4 percent, according to the 2012 SEC report.

“Ratings are enormously important as a regulatory tool,” Patrick Bolton, a finance professor at Columbia University in New York, who has studied the firms, said in a telephone interview. “They control risk-taking and it’s a very good tool when the ratings analysis is done right.”

‘Business Interests’

States aren’t obligated to use certain firms when selling bonds and decide based on best “market execution,” according to Matt Fabian, a managing director of Concord, Massachusetts- based research firm Municipal Market Advisors. All the general obligation bonds issued by New Jersey are graded by the three biggest firms as a matter of “practice,” according to Bill Quinn, a spokesman at the state’s Department of the Treasury.

In its lawsuit, New Jersey said S&P was “acting in its own business interests” when issuing top ratings to securities that were soon cut to junk. S&P corrupted its ratings process to curry favor with the largest Wall Street banks, which paid it high fees in return, California said in its lawsuit. While S&P claimed to be a gatekeeper, it instead “acted like a toll collector,” the state said.

Ratings Pressure

Ratings companies were pressured to award top grades on debt linked to subprime mortgages, or loans to borrowers with poor or limited credit histories, to win business from Wall Street banks, according to the Financial Crisis Inquiry Commission report.