Today’s businesses rely on credit ratings of individuals, other businesses, and even sovereign governments to access credit worthiness of any debt these entities wish to acquire. This book, produced by insurance credit rating company AM Best, chronologically traces the history of credit rating agencies in the United States.
The introductory chapters outline the history of credit in early America, leading up to the founding of credit agencies in the early 1900s. Each of the four major companies (including AM Best) is covered. The bulk of the book focuses on the 1970s onwards, beginning with the establishment of the Nationally Recognized Statistical Ratings Organizations (NRSRO). The chapters are divided by decade, and the book ends with the passage of and initial reaction to the Dodd-Frank Act in 2010.
A history of credit rating agencies necessarily revolves around legislation pertaining to the financial industries, and economic opportunity. This book presents both subjects with sufficient depth so that readers with introductory knowledge of economics and business can understand the narrative without getting too bogged down in excessive detail. The book’s strength is that it explores what major regulations pull into their wake, and how financial industries react to changes in regulation as well as economic opportunities and threats.
The text mostly keeps jargon to a minimum. Political cartoons, photographs of politicians signing various pieces of legislation, and headlines from newspapers are included. Unfortunately, they come at the end of chapters, rather than with the relevant text.
While the narrative is well-written, a table showing the chronology of major economic events and passage of financial legislation would have been useful. Additionally, AM Best, a smaller player in the industry compared to the more dominant companies of Moody’s, S&P, and Fitch, is perhaps referenced more than necessary, a bias likely to be expected, given that it is the book’s publisher.
The book covers a specialized area of the financial industry but should be accessible for a wider audience. Readers interested in learning how credit rating agencies got to where they are today will find this a useful reference.
Also available in hardcover and ebook.
