This paper will explore how the financial regulatory structure propelled three credit rating agencies—Moody's, Standard & Poor's (S&P), and Fitch—to the center of the U.S. bond markets—and thereby ...virtually guaranteed that when these rating agencies did make mistakes, these mistakes would have serious consequences for the financial sector. We begin by looking at some relevant history of the industry, including the series of events that led financial regulators to outsource their judgments to the credit rating agencies (by requiring financial institutions to use the specific bond creditworthiness information that was provided by the major rating agencies) and when the credit rating agencies shifted their business model from “investor pays” to “issuer pays.” We then look at how the credit rating industry evolved and how its interaction with regulatory authorities served as a barrier to entry. We then show how these ingredients combined to contribute to the subprime mortgage debacle and associated financial crisis. Finally, we consider two possible routes for public policy with respect to the credit rating industry: One route would tighten the regulation of the rating agencies, while the other route would reduce the required centrality of the rating agencies and thereby open up the bond information process in way that has not been possible since the 1930s.
Although observers of the Pakistani economy are well aware that a small number of family groups, popularly called "the twenty-two families," dominates the industrial structure of the country, the ...actual effects of this concentration of economic power on income distribution and on other areas of widespread social and political concern arc less well understood. In this important work, Lawrence J. White uses the concepts of industrial organization analysis to achieve an overall view of the problems stemming from the marked industrial concentration in Pakistan.
After discussing the economic effects of industrial concentration as they apply generally to less developed countries, Professor White reviews the Pakistani experience, estimating the overall concentration of power that exists in manufacturing, banking, and insurance. Following an estimate of the extent of concentration in individual markets, he examines the origins of this concentration of power and analyzes its economic and noneconomic effects in Pakistan. The author concludes with a review of the policies that Pakistan has pursued in dealing with industrial concentration and suggests new courses of action for the future.
Originally published in 1974.
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Antitrust policy in the United States has recently gained an unusual amount of political and media attention—including with regard to the application of antitrust to the agricultural sector. There ...are critics who have argued that a major overhaul of antitrust policy is needed. This paper argues that instead there are some important but more modest changes that could go a long way toward significantly strengthening the role that antitrust can play in keeping the US economy competitive, vibrant, and innovative.
The lag in the use of microeconomics in consumer protection policy and litigation—as compared with the use of microeconomics in antitrust/competition policy and litigation—has at least three causes: ...a considerably shorter period of intellectual development; the specific historical origins and culture of the U.S. Federal Trade Commission (FTC), where this disparity is especially noticeable; and the splintering of consumer protection responsibilities across a very large number of federal and state agencies. This paper will expand on these themes and discuss their implications—including the opportunities for expanded research in the area of consumer protection economics. (JEL B12, B13, B21, D18, L41)
In this study, we analyze why commercial banks failed during the recent financial crisis. We find that traditional proxies for the CAMELS components, as well as measures of commercial real estate ...investments, do an excellent job in explaining the failures of banks that were closed during 2009, just as they did in the previous banking crisis of 1985–1992. Surprisingly, we do not find that residential mortgage-backed securities played a significant role in determining which banks failed and which banks survived. Our results offer support for the CAMELS approach to judging the safety and soundness of commercial banks, but call, into serious question the current system of regulatory risk weights and concentration limits on commercial real estate loans.
Antitrust discussions in the U.S. have a long tradition of describing intellectual property (IP)—primarily patents and copyrights—in unqualified terms of “monopoly”. Although there have been ...substantial efforts over the past two decades to pull back from this automatic association, the presumption of unqualified monopoly continues to appear in important legal decisions—as well as in legal and social sciences academic discussions—that involve IP. There is another place where these decisions and discussions might start: with a presumption that any IP is “primarily property”—albeit with some important distinctions that separate IP from “garden variety” tangible property and that raise the possibility of market power in some instances. This paper explores the important similarities—and differences—between “garden variety” property, such as real estate, and IP; it concludes that the similarities are substantial, so that the presumption that IP is “primarily property” is a reasonable alternative starting point for antitrust/IP discussions. It then discusses some beneficial differences that this alternative starting point could have made and/or could still make.
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