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Deeply Persistently Conflicted: Credit Rating Agencies In The Current Regulatory Environment, Timothy E. Lynch
Deeply Persistently Conflicted: Credit Rating Agencies In The Current Regulatory Environment, Timothy E. Lynch
Faculty Works
Credit rating agencies have a pervasive and potentially devastating influence on the financial well-being of the public. Yet, despite the recent passage of the Credit Rating Agency Reform Act, credit rating agencies enjoy a relative lack of regulatory oversight. One explanation for this lack of oversight has been the appeal of a self-regulating approach to credit rating agencies that claim to rely deeply on their reputational standing within the financial world. There are strong arguments for doubting this approach, including the conflicting self-interest of credit rating agencies whose profits are gained or lost depending on their ability to lure the …
Those Who Forget The Regulatory Successes Of The Past Are Condemned To Failure, William K. Black
Those Who Forget The Regulatory Successes Of The Past Are Condemned To Failure, William K. Black
Faculty Works
This paper shows that the reregulation of the savings & loan (S&L) industry was successful because the regulators correctly identified the primary cause of the second phase of the debacle as an epidemic of “accounting control fraud” and took effective measures to contain such frauds. Control frauds occur when the persons controlling a seemingly legitimate organization use it as a “weapon” to defraud. In the financial sector, accounting control fraud is the “weapon of choice.” The regulators’ primary insights were (1) that lenders optimize accounting fraud by engaging in a distinctive operational pattern that would be irrational for any honest …