TY  - GEN
AB  - 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.
AU  - Flandreau, Marc
AU  - Sławatyniec, Joanna Kinga
CY  - Geneva
DA  - 2013
DA  - 2013
ID  - 22978
L1  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf
L1  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf?subformat=pdfa
L2  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf
L2  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf?subformat=pdfa
L4  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf
L4  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf?subformat=pdfa
LK  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf
LK  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf?subformat=pdfa
N2  - 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.
PB  - The Graduate Institute of International and Development Studies
PP  - Geneva
PY  - 2013
PY  - 2013
T1  - Understanding Rating Addiction: US Courts and the Origins of Rating Agencies’ Regulatory License (1900-1940)
TI  - Understanding Rating Addiction: US Courts and the Origins of Rating Agencies’ Regulatory License (1900-1940)
UR  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf
UR  - https://repository.graduateinstitute.ch/record/22978/files/HEIDWP11-2013.pdf?subformat=pdfa
Y1  - 2013
ER  -