Credit Ratings, Congress, and Mandatory Self Reliance

Abstract

Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires federal agencies to identify, remove, and replace all references to credit ratings in their regulations. It responds to longstanding concerns­ heightened by the recent financial crisis-that investors place undue reliance on the opinions of a small number of eminently fallible (and perhaps fundamentally conflicted) credit rating agencies. At first blush, the approach adopted in§ 939A appears commonsense: if one wishes to reduce reliance on credit ratings, amending regulations that compel investors to consult credit ratings seems like a straightforward place to start. This Note reconsiders: what appears straightforward in principle has proved to be anything but in practice.