McHenry introduces legislation on credit rating agencies
WASHINGTON, D.C.
U.S. Rep. Patrick McHenry (N.C. Congressional District 10) has introduced the Credit Rating Agency Transparency and Disclosure Act.
McHenry is a member of the House Financial Services Committee.
Also, Mary Schapiro, the newly-confirmed Chairwoman of the Securities and Exchange Commission (SEC), addressed the need for reform in the credit rating market.
“Bringing greater transparency to the credit rating market is a good first step that we can all agree on. I certainly hope that Chairwoman Schapiro will lend her support to this important legislation,” McHenry said.
As mortgage products were packaged and sold as securities during the boom in the housing market, the credit rating industry consistently gave undeservedly-high ratings to many of these securities. Now, there is wide agreement that the credit rating agencies need to institute reforms to their business practices.
“The housing market meltdown exposed dangerous weaknesses in the credit rating industry. This bill will give investors crucial information they need to make sound financial decisions,” he said.
McHenry’s Credit Rating Agency Transparency and Disclosure Act would require nationally-recognized credit rating agencies to provide additional disclosures with respect to the rating of structured securities. Specifically, the bill will do the following:
• Ensure that issuers and originators are providing credit rating agencies with adequate information on the assets underlying a structured security.
• Require credit rating agencies to institute procedures for getting data from issuers and originators concerning the procedures employed to attest to the data’s veracity and the fraud detection capabilities surrounding the process.
• Require credit rating agencies to disclose in a central database the historical default rates of all classes of financial products they have rated.
With the enactment of this legislation, investors would have greater confidence in the quality of structured security ratings, resulting in a healthier market for consumers.
