A Historical Primer on the Business of Credit Ratings
Abstract (Via Richard Sylla)
When the business of bond credit ratings by independent rating agencies began in the United States early in the twentieth century, bond markets—and capital markets generally—had already existed for at least three centuries. Moreover, for at least two centuries, these old capital markets were to an extent even ‘global.’ That in itself indicates that agency credit ratings are hardly an integral part of capital market history. It also raises several questions. Why did credit rating agencies first appear when (1909) and where (the United States) they did in history? What has been the experience of capital market participants with agency credit ratings since they did appear? And what roles do agency ratings now play in those markets, which in recent decades have again become global, to an even greater extent than previously in history.