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Professor Lawrence White Testifies Before the Senate on the Regulation of Credit Rating Agencies

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On August 5, 2009, NYU Stern Professor Lawrence White testified before the US Senate Committee on Banking, Housing and Urban Affairs during a hearing on “Examining Proposals to Enhance the Regulation of Credit Rating Agencies.”

“[The] urge for greater regulation is understandable – but it is misguided and potentially quite harmful,” explained Professor White. “The heightened regulation of the rating agencies is likely to discourage entry, rigidify a specified set of structures and procedures, and discourage innovation in new ways of gathering and assessing information, new technologies, new methodologies and new models – and may well not achieve the goal of inducing better ratings from the agencies.”

An advocate for increased competition, he proposed the following:

  • Eliminate regulatory reliance on ratings
  • Eliminate the force of law that has been accorded to these third-party judgments
  • Bring market forces to bear
Read Prof. White's full testimony