Since 2008, academics and policymakers have frequently debated why bond rating agencies such as Moody's, S&P, and Fitch enjoy considerable power and influence. The 2008 financial crisis focused our attention on the bond rating agencies that had previously categorized mortgage-backed securities as investment grade. Scholars have attributed the power enjoyed by the rating agencies to regulations that confer a privileged status on those agencies that are designated as nationally recognized statistical rating organizations (NRSROs) by the U.S. Securities and Exchange Commission (SEC). While these authors mention in passing that the relevant regulation went into effect in 1975, none has conducted archival research to examine why this regulation was introduced at that time. This article is the first historical investigation of the creation of this crucial regulation, which entrenched the concept of the NRSRO in federal securities law. It shows that the SEC mandated the use of NRSRO-created ratings even though SEC officials vigorously debated whether it was wise for the commission to endorse ratings produced by agencies that operate on the basis of the controversial issuer-pay model. This article contributes to our understanding of the SEC's role in the development of the distinctive features of American capitalism.

America's securities markets constitute a central distinguishing feature of its brand of capitalism. What are their political origins? In contrast to arguments which point to business owners as determining the institutional foundations of America's political economy, this paper argues that farmers played a leading role. Indeed, the rules and regulations governing U.S. securities markets were created in opposition to the wishes of business owners, and without farmers' political influence, the U.S. may have developed a financial system similar to that found in continental Europe. Moreover, to the extent that U.S. securities regulations serve as a template for international financial standards, the paper shows that the humble American farmer inadvertently contributed to the financialization of the modern global economy.