Financial regulation was outsourced to quasi-private bodies like rating agencies

Evidence

One way to exert power in restraint of democracy is to bend the state to a market logic, pretending one can replace “citizens” with “customers” (see point 5). Consequently, the neoliberals seek to restructure the state with numerous audit devices (under the sign of “accountability” or the “audit society”) or impose rationalization through introduction of the “new public management”; or, better yet, convert state services to private provision on a contractual basis. Here again our commandments touch directly upon the crisis. The financial sector was one of the major sites of the outsourcing of state supervision to quasi-private organizations, such as the Financial Industry Regulation Authority (FINRA) or the credit rating agencies such as Moody’s, Fitch, and Standard & Poor’s. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 156

Categorization

• XREF: Connects to Milgrom and Shapiro on extralegal/private institutional ordering — rating agencies as private governance substitutes for state supervision. — connects to: Rating agencies increasingly function as rule makers rather than neutral judges. — Shapiro, Susan P., The Social Control of Impersonal Trust, 105; Private asset managers designed and ran government bailout programs — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 944; Credit ratings can be rented, shifting risk onto investors who trust them. — Shapiro, Susan P., The Social Control of Impersonal Trust, 126 (+1 more)
• QUESTION: How exactly did FINRA and the rating agencies’ quasi-private status change their incentives relative to a purely public regulator?

Broader Connections

• Rating agencies increasingly function as rule makers rather than neutral judges. #expands (0.92) — Shapiro, Susan P., The Social Control of Impersonal Trust, 105
• Credit ratings can be rented, shifting risk onto investors who trust them. #expands (0.82) — Shapiro, Susan P., The Social Control of Impersonal Trust, 126
• Private asset managers designed and ran government bailout programs #exemplifies (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 944