Overdependence on Credit Ratings was a Primary Cause of the Crisis

Proceedings of the 2008 International Banking Conference: "The First Credit Market Turmoil of the 21st Century", World Scientific Publishers, 2009

San Diego Legal Studies Paper No. 09-015

19 Pages Posted: 9 Jul 2009  

Frank Partnoy

University of San Diego School of Law

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Abstract

A primary cause of the recent credit market turmoil was overdependence on credit ratings and credit rating agencies. Without such overdependence, the complex financial instruments, particularly Collateralized Debt Obligations (CDOs) and Structured Investment Vehicles (SIVs), which were at the center of the crisis could not, and would not, have been created or sold. Long-term sustainable policy measures should take into account both regulatory and behavioral overdependence on ratings.

Keywords: credit ratings, credit rating agencies, derivatives, stuctured finance, regulation, accounting, credit derivatives

JEL Classification: G18, G28, G38, K20, K22, K23, L10, L40

Suggested Citation

Partnoy, Frank, Overdependence on Credit Ratings was a Primary Cause of the Crisis. Proceedings of the 2008 International Banking Conference: "The First Credit Market Turmoil of the 21st Century", World Scientific Publishers, 2009 ; San Diego Legal Studies Paper No. 09-015. Available at SSRN: https://ssrn.com/abstract=1430653

Frank Partnoy (Contact Author)

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-2352 (Phone)
619-260-4180 (Fax)

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