Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/77448 
Year of Publication: 
2013
Series/Report no.: 
Graduate Institute of International and Development Studies Working Paper No. 11/2013
Publisher: 
Graduate Institute of International and Development Studies, Geneva
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.
Document Type: 
Working Paper

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