The Credit Rating Agencies and the Subprime Mess: Greedy, Ignorant, and Stressed?
Version of Record online: 6 JUL 2009
Copyright © 2009 The American Society for Public Administration
Public Administration Review
Volume 69, Issue 4, pages 640–650, July/August 2009
How to Cite
Rom, M. C. (2009), The Credit Rating Agencies and the Subprime Mess: Greedy, Ignorant, and Stressed?. Public Administration Review, 69: 640–650. doi: 10.1111/j.1540-6210.2009.02013.x
- Issue online: 6 JUL 2009
- Version of Record online: 6 JUL 2009
The credit rating agencies (CRAs) were an important component of the subprime mess. This article describes what the CRAs are, what they do, what roles they play, and how they fit into the regulatory system. It outlines the types of mortgage securities that the CRAs rate and outlines the evolution of the subprime mess. It then assesses three prime suspects in the CRAs' problems: incentives, ignorance, and stress. The author concludes that all three factors were important, that public officials were slow to react, and that additional safeguards have been put into place to prevent such problems in the future.