Tuesday, April 6, 2010
Reed: "Cynical Attempt by Wall Street Lobbyists to Kill Credit Rating Reform Must be Resoundingly Rejected"
WASHINGTON, DC - After reports that Wall Street lobbyists have enlisted Republican senators to try to kill U.S. Senator Jack Reed's (D-RI) provision to make credit rating agencies more impartial and independent, Reed, a senior Banking Committee member, issued the following statement:
"Credit rating reform addresses one of the systemic failures that caused the financial crisis. My provision will improve the accountability and transparency of credit ratings which are critical to the health and productivity of our financial markets.
"We must crack down on conflicts of interest and help ensure that ratings are based on facts, not fees. The same companies that helped cause the financial crisis are now trying to block reform."
"This cynical attempt by Wall Street lobbyists to kill Wall Street reform before it has a chance to see the light of day must be resoundingly rejected."
Reed's legislation would give the Securities and Exchange Commission (SEC) strong new authority to oversee credit rating firms and hold them accountable for conflicts of interest and other internal control deficiencies that have weakened ratings in the past. The bill also includes a narrowly tailored provision that would allow investors to take legal action against rating firms that "knowingly or recklessly" fail to review key information in developing ratings. Credit rating firms could avoid litigation by conducting thorough reviews or by obtaining assessments from independent firms.
Earlier today, Bloomberg News reported: "Standard & Poor's, the McGraw-Hill Cos. unit facing increased regulation after flawed assessments of mortgage bonds, is enlisting Republican lawmakers to kill legislation that may make it easier to sue credit-rating firms.
Senate Banking Committee members Bob Corker of Tennessee and Judd Gregg of New Hampshire are being asked to help defeat a proposal that may make judges less likely to dismiss lawsuits against ratings firms, McGraw-Hill lobbyist Cynthia Braddon wrote in a March 22 e-mail to congressional staff members.
The banking panel approved legislation last month that includes the liability measure as part of a sweeping plan to tighten regulation of Wall Street. Republicans could force Democrats to drop the provision in exchange for votes needed to ensure passage of the broader rules overhaul, according to a copy of Braddon's e-mail obtained by Bloomberg News.
Democrats "cannot bring this bill to the Senate floor" unless it's supported by Republicans, Braddon wrote in the e-mail. The liability of credit-rating companies "remains a bone of contention," she wrote."
Reed stated: "The one thing these lobbyists are right about is that we need bipartisan support to move forward with Wall Street reform. I hope these overtures from the banking industry will be resoundingly rejected and that we can get several Republican senators to join us in passing comprehensive Wall Street reform that increases transparency and protects taxpayers."
"Credit rating firms, like any other industry, should be held accountable if they knowingly or recklessly mislead investors. We must strengthen oversight and make these agencies more impartial and independent," continued Reed. "We can't permit the status quo that has allowed Wall Street to profit at taxpayer expense and denied regulators the tools and authority needed to keep pace with a rapidly changing and expanding financial marketplace."
"I hope we can get bipartisan support to protect taxpayers and curb the reckless practices that too many rating agencies and Wall Street banks engaged in," concluded Reed. "These reforms will help strengthen the economy in the short term while preventing future systemic failures."