Understanding Rating Addiction: US Courts and the Origins of Rating Agencies’ Regulatory License (1900-1940)

Marc Flandreau and Joanna Kinga Sławatyniec

No 11-2013, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper discusses the “regulatory license” view that reliance by regulators on the output of rating agencies in the 1930s “caused” the agencies to become a central part of the fabric of the US financial system. Exploring pre-1930 court records, we find evidence of a growing reliance on the agencies that pre-dates the regulatory moves of the 1930s. We argue that courts began using ratings as financial community produced norms of prudence, providing a novel interpretation of the emergence of rating in financial systems as a product of trustee law. We remark that this created “a legal license” problem, creating incentives and conflicts of interest not unlike those which modern observers usually associate with regulation in the subprime crisis.

Pages: 23 pages
Date: 2013-05-21
New Economics Papers: this item is included in nep-his
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP11-2013.pdf (application/pdf)

Related works:
Journal Article: Understanding rating addiction: US courts and the origins of rating agencies' regulatory license (1900–1940) (2013)
Working Paper: Understanding Rating Addiction: US Courts and the Origins of Rating Agencies' Regulatory License (1900-1940) (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp11-2013

Access Statistics for this paper

More papers in IHEID Working Papers from Economics Section, The Graduate Institute of International Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dorina Dobre ().