Abstract

http://ssrn.com/abstract=1434483
 
 

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The Credit Rating Agencies: Understanding Their Central Role in the Subprime Debacle of 2007-2008


Lawrence J. White


New York University (NYU) - Leonard N. Stern School of Business; Leonard N. Stern School of Business - Department of Economics

April 8, 2009


Abstract:     
The three major credit rating agencies -- Moody's, Standard & Poor's, and Fitch -- played a central role in the subprime mortgage debacle of 2007-2008. That centrality was not accidental. Seven decades of financial regulation propelled these rating agencies into the center of the bond information market, by elevating their judgments about the creditworthiness of bonds so that those judgments attained the force of law. The Securities and Exchange Commission exacerbated this problem by erecting a barrier to entry into the credit rating business in 1975. Understanding this history is crucial for any reasoned debate about the future course of public policy with respect to the rating agencies.

Number of Pages in PDF File: 17

Keywords: credit rating agencies, nationally recognized statistical rating agency (NRSRO), Securities and Exchange Commission (SEC), bond information market

JEL Classification: G18, K23, L59

working papers series


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Date posted: July 16, 2009  

Suggested Citation

White, Lawrence J., The Credit Rating Agencies: Understanding Their Central Role in the Subprime Debacle of 2007-2008 (April 8, 2009). Available at SSRN: http://ssrn.com/abstract=1434483 or http://dx.doi.org/10.2139/ssrn.1434483

Contact Information

Lawrence J. White (Contact Author)
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
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