My first thought was: there's almost no incentive to give a student a bad grade. Institutions want their students to do well in the marketplace, and giving bad grades doesn't accomplish that. The only downside to bad grades is that your institution's reputation might suffer in the long run if you graduate bad students, but it's not clear who within the university is properly incentivized to think about those long term consequences.

My second thought was: nowadays the bigger reputation signal of a university's quality is how selective they are in admissions, and not what they actually teach the students. There's data showing that over this time period, average SAT scores became much more correlated with ranking, suggesting that students are more and more sorted by talent at the entry point. If university reputation is based on selectivity up front, then grades out the door matter less. The increase in selectivity is likely due to the increasingly national/global nature of universities, as well as the increase in demand for them.

A third idea is that selection on pedigree has become more important. That is, select students who have a good family / network. This may be especially important in a fiatized world where the Cantillon effect dominates resource allocation. Another way to say this is, who you know has become more important than what you know, which again makes coursework less important, reputation-wise.