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2009 Colum. Bus. L. Rev. 109 (2009)
Credit Rating Agencies and the Worldwide Credit Crisis: The Limits of Reputation, the Insufficiency of Reform, and a Proposal for Improvement

handle is hein.journals/colb2009 and id is 119 raw text is: CREDIT RATING AGENCIES AND THE WORLDWIDE CREDIT CRISIS: THE LIMITS OF REPUTATION, THE INSUFFICIENCY OF REFORM, AND A PROPOSAL FOR IMPROVEMENT John Patrick Hunt* I. Introduction ................................................................ 112 II. Credit Ratings and the Worldwide Credit Crisis.. 114 A. Rating Agencies and Ratings .............................. 114 B. Ratings and Structured Finance ......................... 117 C. The Worldwide Credit Crisis ........................... 120 D. Regulatory Initiatives Regarding Rating A gencies ............................................................... 124 III. The Reputational-Capital View of Rating Agencies and Its Relationship to Policy .................... 127 A. The Reputational-Capital View of Rating A gen cies ............................................................... 127 B. Perceived Problems of the Rating Market .......... 129 1. Lim ited Com petition ...................................... 131 2. Lack of Transparency .................................. 138 a. Methodological Transparency .................. 138 b. Performance Transparency ...................... 141 3. Rating-Dependent Regulation ....................... 142 a. The Scope of Rating-Dependent R egulation ................................................. 144 i. Federal Rules ....................................... 144 ii. State Rules and Judicial Decisions .... 147 * Fellow, Berkeley Center for Law, Business and the Economy. M.F.E., University of California, Berkeley; J.D., Yale Law School. Effective July 2009, the author will be Acting Professor of Law, University of California, Davis. The author thanks Jesse Fried, Eric Talley, and Ken Taymor for guidance, Katherine Florey for helpful discussions, and Lara Palanjian and Josh Weigensberg for excellent research assistance. The author appreciates financial support provided by the Berkeley Center for Law, Business and the Economy.

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