Tuesday, August 11, 2009

Reiss on Ratings Agencies and the Subprime Crisis

David J. Reiss (Brooklyn) has posted Rating Agencies: Facilitators of Predatory Lending in the Subprime Market on SSRN.  Here's the abstract:

This book chapter explores how the three largest rating agencies, Standard & Poor’s, Moody’s Investor Service and Fitch Ratings, exploited their privileged regulatory status to profit from the booming subprime mortgage market at the expense of homeowners. These rating agencies boosted their own bottom lines and assisted predatory lenders by effectively vetoing state consumer protection initiatives. While regulators have identified enhanced investor protection regulation of credit rating agencies as a priority, future regulation must ensure that the systemic biases of the rating agency industry are no longer permitted to trump legitimate state consumer protection initiatives.

Ben Barros

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