Editor's note: This is the second of Scott Rothbort's two-part look at the future of the financial services sector.
Don't forget about the mortgage brokers. They will probably have to deal with increasing regulation that will require large infrastructure and capital to maintain their business operations. Eventually, a new, better organized and more transparent industry will emerge. This new mortgage brokerage industry could evolve to include publically traded mortgage brokers that operate under spelled-out regulatory requirements. I see this akin to the insurance industry, which has insurance brokers such as Marsh & McLennan ( MMC) and Aon ( AOC) that operate independently from the actual insurers (that underwrite the insurance risk), such as American International Group ( AIG), Axa ( AXA) and Prudential ( PRU). Finally, I expect "no-document," subprime and adjustable rate mortgage (ARM) loans will either be outlawed, strictly regulated or will wither away, as conventional mortgages become the rule not the exception. (Don't miss: " Opinion: Paradigm Shift in Mortgages," " Opinion: Obama Subsidizes the Wrong People" and " For Mortgages, Paying Extra Doesn't Always Pay Off")
No real competition. Currently, the debt ratings business is an oligopoly dominated by Moody's ( MCO), Standard & Poor's (a McGraw-Hill ( MHP) property) and Fitch (majority-owned by Fimalac of France). Although some others do exist, we simply need to have more rating agencies. More competition will yield lower costs to issuers and improved end product. The barriers to entry must be torn down and new players should be motivated or enticed to enter the debt ratings industry. No oversight. All rating agencies need to be accountable for their actions. The best way to do this is to create or designate a supervisory agency to oversee the agencies and enforce regulations. Another idea is to create a uniform rating system.