This vote was on an amendment by George LeMieux, R-Fla. that would remove any mandates in current law requiring financial investments to be issued a credit rating by a certified rating agency. The amendment was offered to a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee complex financial investments.
At present, there are fewer than a dozen agencies certified to issue financial instruments a credit rating. These ratings are how investors judge whether a certain investment is worthwhile.
LeMieux said his amendment would do away with credit rating agencies’ current monopoly under current law, and allow more rating agencies to be created. LeMieux said his amendment would even allow banks to function as credit rating agencies.
LeMieux offered his amendment as a counterpoint to a separate one offered by Al Franken, D-Minn. (see vote 146). Franken’s amendment would require credit ratings for certain kinds of complex financial investments to be issued by a newly-created independent board, instead of by a credit rating agency.
LeMieux said he agrees with Franken that there are conflicts of interest in the current regime that makes creating a neutral arbiter a good idea, but added that the two amendments do not conflict.
“I believe there are conflicts of interest. We cannot have the people whose products they rate pay them. He is right about that, but I would go further. My amendment writes these organizations out of law. Why should we reward them and allow them to continue to have what, in effect, is a government-sponsored monopoly? Federal law says creditworthiness will be determined by these rating agencies. Why should we reward them by allowing them to continue in any fashion to have the sanction and permission and basically a monopoly granted by Federal law? That doesn’t make any sense to me,” Lemieux said.
Franken agreed that in his estimation the two amendments don’t conflict, but do take a fundamentally different approach. He said LeMieux’s approach “ignores the reality that ratings will, by necessity, continue and will always play a role in our economy. Investors will still rely on them even if the statutes do not mandate it. I believe Senator LeMieux’s approach does absolutely nothing to tackle the conflicts of interest or address the current oligopoly, both of which would surely persist under this approach, especially the conflicts of interest.”
By a vote of 61-38, the amendment was adopted. Of Democrats present, 19 voted for the amendment and 37 voted against it (including a majority of the most progressive members). The end result is that the measure went forward with language that would remove any mandates in current law requiring financial investments to be issued a credit rating by a certified rating agency.