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Understanding Rating Addiction: US Courts and the Origins of Rating Agencies' Regulatory License (1900-1940)


  • Marc Flandreau

    () (Graduate Institute for International Studies and Development)

  • Joanna Kinga Slawatyniec

    (Graduate Institute for International Studies and Development)


This paper does challenge 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. We argue that long before the 1930s, courts began using ratings as financial community produced norms of prudence. This created "a legal license" problem, very analogous to the "regulatory license" problem and gave rise to conflicts of interest not unlike those that have been discussed in the context of the subprime crisis. Rating agencies may have had a responsibility in the Great Depression of the 1930s.

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  • Marc Flandreau & Joanna Kinga Slawatyniec, 2013. "Understanding Rating Addiction: US Courts and the Origins of Rating Agencies' Regulatory License (1900-1940)," Working Papers 0044, European Historical Economics Society (EHES).
  • Handle: RePEc:hes:wpaper:0044

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