WASHINGTON, D.C. [05/13/10] – Today, the Restore Integrity To Credit Ratings amendment (S.Amdt. 3991) authored by U.S. Sen. Al Franken (D-Minn.) and co-sponsored by Sens. Charles E. Schumer (D-N.Y.), Roger Wicker (R-Miss.), Bill Nelson (D-Fl.) and Charles Grassley (R-Iowa) passed the Senate by 64 to 35 votes, becoming part of the Wall Street Reform bill currently being debated.
 
“Today is a major victory for Main Streets all over America,” said Sen. Franken. “We’re cleaning up Wall Street’s dishonest system and replacing it with one that rewards accuracy instead of fraud. My proposal wasn’t conservative, or liberal, or even moderate. It was just plain common sense. That’s why I had the support of colleagues on both sides of the aisle and why we were able to win today.”
 
“Credit rating agencies were one of the main culprits in the financial crisis,” said Sen. Schumer. “They adopted questionable practices intended to win over clients, neglected their own internal controls and developed a coziness with clients. Under this measure, issuers will no longer be able to choose a rating agency and directly influence what kind of ratings they can get.”
 
“Today, the Senate sent a strong, bipartisan message that conflicts of interest must be removed from the current credit-rating system,” said Sen. Wicker.  “The current system is broken and is detrimental to a well-functioning marketplace.  I hope this legislation will help facilitate a trustworthy credit-rating system so investors can confidently assess the creditworthiness of certain investments.”
 
“The credit-rating agencies are supposed to be independent evaluators of financial companies, but overly cozy relationships with those who they’re supposed to scrutinize have interfered.  This conflict-of-interest amendment is an important reform to help bring about the independent assessment investors deserve.  It’s a matter of market integrity,” Sen. Grassley said.

The proposal ends the conflicts of interest inherent in Wall Street’s current pay-to-play credit rating system. Right now, banks choose which credit rating agencies will rate the quality of their bonds and other financial products, resulting in the agencies giving away undeserved top ratings to countless sub-par financial products in order to attract business.

Sen. Franken’s Restore Integrity To Credit Ratings amendment is also co-sponsored by Sens. Carl Levin (D-Mich.), Richard Durbin (D-Ill.), Tom Harkin (D-Iowa), Amy Klobuchar (D-Minn.), Ted Kaufman (D-Del.), Sheldon Whitehouse (D-R.I.), Sherrod Brown (D-Ohio), Patty Murray (D-Wash.), Jeff Merkley (D-Ore.), Jeff Bingaman (D-N.M.), Frank Lautenberg (D-N.J.), Jeanne Shaheen (D-N.H.), Robert Casey (D-Pa.), Bernard Sanders (I.-Vt.), Mark Begich (D-Alaska), Ron Wyden (D-Ore.), and Tim Johnson (D-S.D.).

It cleans up the system by making sure a bank or financial institution can’t shop around among credit rating agencies to get a product’s initial rating.  The bipartisan proposal creates a board, overseen by the Securities and Exchange Commission, which will assign credit rating agencies to provide initial ratings in order to eliminate inherent conflicts of interest.

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