Ryan Grim had the story last night:

Larry Summers and his deputy, Diana Farrell, along with Eric Stein, Treasury’s guy for consumer affairs, met with progressive groups at the Eisenhower building to talk Wall Street reform. There were few surprises, meeting attendees tell HuffPost Hill, with Summers and the groups mostly in accord. The one divergence came over Al Franken’s amendment, which would end the practice of banks choosing their own rating agencies and instead assign them by lottery, removing a colossal conflict of interest. Summers said he wasn’t there yet but was willing to be convinced, asking Public Citizen’s David Arkush and Demos’ Heather McGhee for more info. The White House is still pushing to remove the auto-dealer carveout from the consumer protection bureau. The groups pushed Summers to work with Maria Cantwell, who is threatening to vote no if her amendment to tighten derivatives regulation isn’t adopted. Summers said he was concerned about her amendment’s language that would nullify derivatives contracts, but saw the value of having Cantwell on board.

The WH agreed with the groups on granular stuff related to consumer protection authority, such as funding, rulemaking, and preemption, and also that conferees ought to close the bill’s loophole letting private equity and venture capital firms out of the title requiring hedge funds to register with the SEC.

Major unions (AFL-CIO, SEIU, AFSCME), consumer groups, and representatives from Americans for Financial Reform attended the meeting.

I think the White House will actually put some muscle in conference behind the consumer protection agency, and the statements on derivatives are somewhat encouraging. I want to focus on the part about the credit rating agencies, which were assailed at yesterday’s FCIC hearing in New York. Summers can merely read the transcript from the whistleblower at Moody’s if he wants to be convinced that the system needs a total overhaul. And Warren Buffett’s self-serving testimony (Berkshire Hathaway has a major stake in Moody’s, and defended them yesterday) didn’t give much confidence to the argument on the other side. Zach Carter writes:

Buffett is the largest shareholder in Moody’s. He says over and over again that he believes in due diligence– making sure you understand what you invest in. But Douglas Holtz-Eakin and Phil Angelides pressed Buffett on whether he knew or should have known Moody’s was doing terribly reckless things that endangered the global economy.

Buffett responded that he didn’t know, and he couldn’t be expected to know. Companies are complicated, and no shareholder can understand everything that a company is up to.

This is an astonishing statement in a couple of respects. First, rating securities is the business Moody’s is in, and they screwed up just about every aspect of that business they could have, from corporate debt to synthetic CDOs. This was not one employee somewhere misunderstanding one deal– this was the entire company missing every aspect of its business.

But here’s the bigger question: shareholders are owners. If the largest shareholder doesn’t know what a company is up to, and can’t be expected to, how can you possibly expect that corporation to ever act in a responsible way?

Now, even Buffett allowed that the system has flaws, particularly the issuer-pays model, where banks fund the rating agencies that rate their products. He said of Franken’s amendment, where an SEC agency would assign raters for initial ratings, “I suppose it could happen… I’m not arguing this is the perfect model. I’m just saying it’s hard to change.”

Particularly when powerful interests with a financial incentive toward the status quo stand in the way. We’ll see if Summers and the White House makes a decision based on available information about a broken rating agency system (where over 80% of all mortgage-backed “triple-A” securities were downrated), or based on pleasing those powerful interests.