A Research on the Lapse of Credit Rating Causing the Subprime Crisis

The eruption of the Subprime Crisis in the United States,the most developed country in the world,and with the most advanced supervision and risk control mechanisms in place,sets one in deep thinking about it. The Credit Rating Agencies have played an important role in information intermediary area. On the one hand,the Credit Rating Agencies have solved the problem of information asymmetry. On the other hand,the entrust-proxy relationship between financial institutions and Credit Rating Agencies effectively lends the latter the authority of a quasi-regulator. For this reason,the regulator can not perform effective supervision on financial institutions. The lapse of credit rating has caused the flooding of poor-quality financial products in the financial markets. Finally,it leads to the Subprime Crisis.