[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6308 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 6308

  To ensure uniform and accurate credit rating of municipal bonds and 
     provide for a review of the municipal bond insurance industry.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 19, 2008

     Mr. Frank of Massachusetts (for himself, Mr. Capuano, and Mr. 
  Kanjorski) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
  To ensure uniform and accurate credit rating of municipal bonds and 
     provide for a review of the municipal bond insurance industry.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Municipal Bond Fairness Act''.

   TITLE I--DISCRIMINATORY RATINGS TREATMENT OF STATE AND MUNICIPAL 
                               SECURITIES

SEC. 101. PRESERVATION OF AUTHORITY TO PREVENT DISCRIMINATION.

    Section 15E(c)) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-7(c))) is amended--
            (1) in paragraph (2), by striking ``Notwithstanding'' and 
        inserting ``Subject to paragraph (3), but notwithstanding''; 
        and
            (2) by adding at the end the following new paragraphs:
            ``(3) Ratings clarity and consistency.--
                    ``(A) Commission obligation.--Subject to 
                subparagraph (B), but notwithstanding any other 
                provision of this subsection, the Commission shall 
                require each nationally recognized statistical rating 
                organization that is registered under this section--
                            ``(i) to establish and maintain credit 
                        ratings with respect to securities and money 
                        market instruments designed to assess the risk 
                        that investors in securities and money market 
                        instruments may not receive payment in 
                        accordance with the terms of issuance of such 
                        securities and instruments;
                            ``(ii) to define clearly any rating symbol 
                        used by that organization; and
                            ``(iii) to apply such rating symbol in a 
                        consistent manner for all types of securities 
                        and money market instruments to which that 
                        symbol is assigned.
                    ``(B) Complementary ratings.--The Commission shall 
                not impose any requirement under subparagraph (A) that 
                prevents nationally recognized statistical rating 
                organizations from establishing ratings that are 
                complementary to the ratings described in subparagraph 
                (A)(i) and that are created to measure a discrete 
                aspect of the security's or instrument's risk.
            ``(4) Review.--
                    ``(A) Performance measures.--For purposes of 
                paragraph (1), the Commission shall, by rule, establish 
                performance measures to be used to determine when to 
                initiate a review concerning whether a nationally 
                recognized statistical rating organization--
                            ``(i) has issued ratings in material 
                        contravention of the procedures described in 
                        paragraph (1); or
                            ``(ii) has failed to adhere to such 
                        organization's stated procedures and 
                        methodologies for issuing such ratings.
                    ``(B) Consideration of evidence.--The rules 
                required by subparagraph (A) shall require the 
                consideration of evidence of performance of the 
                organization's ratings in each of the categories 
                described in clauses (i) through (v) of section 
                3(a)(62)(B) during an appropriate interval (as 
                determined by the Commission), including aggregate 
                transition of ratings in discrete asset classes.''.

         TITLE II--REVIEW OF MUNICIPAL BOND INSURANCE INDUSTRY

SEC. 201. AUTHORITY OF SECRETARY .

    (a) Collection and Use of Information.--Except as provided in 
subsection (b), the Secretary of the Treasury shall have the authority 
to receive, analyze, collect, and disseminate information, data, and 
material, and issue reports, regarding entities that insure or 
guarantee the payment of any portion of the principal and interest of 
any municipal obligation, including information, data, and material 
regarding--
            (1) financial safety and soundness of such entities;
            (2) concentration of insurance liabilities of such 
        entities;
            (3) performance of such entities under various scenarios of 
        macro- and micro-economic stress;
            (4) underwriting standards for such entities; and
            (5) risk management of such entities.
    (b) Protection of Privacy.--Any requirement under Federal or State 
law to the extent otherwise applicable, or any requirement pursuant to 
a written agreement in effect between the Secretary and the National 
Association of Insurance Commissioners or any member or affiliate of 
such Association, regarding the privacy or confidentiality of any 
information, data, or material in the possession of the Secretary or 
such Association or any member or affiliate of such Association, and 
any privilege arising under Federal or State law (including the rules 
of any Federal or State court) with respect to such information, data, 
or material, shall continue to apply to such information, data, or 
material after the information, data, or material has, pursuant to 
subsection (a), been provided to or otherwise collected or received by 
the Secretary or such Association or any member or affiliate of such 
Association.

SEC. 202. SOURCES OF INFORMATION.

    The Secretary may collect and receive information, data, and 
material pursuant to section 201 from State insurance regulatory 
authorities, the National Association of Insurance Commissioners, and 
any other sources the Secretary determines are credible.

SEC. 203. REPORTS TO CONGRESS.

    The Secretary shall submit a report annually to the Committee on 
Financial Services of the House of Representatives and the Committee on 
Banking, Housing, and Urban Affairs of the Senate on the financial 
state of the industry for insurance and guarantee of municipal bonds, 
meaningful trends in such industry, and the potential impacts on the 
overall financial system in the United States that entities that 
providing such insurance and guarantees could have under various 
scenarios of macro- and micro-economic stress.

SEC. 204. RETENTION OF EXISTING REGULATORY AUTHORITY.

    This title may not be construed to establish any supervisory or 
regulatory authority of the Secretary over any entity that insures or 
guarantees the payment of any portion of the principal and interest of 
any municipal obligation.

SEC. 205. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Municipal obligation.--The term ``municipal 
        obligation'' means any bond, note, security, or other debt 
        obligation issued by any State, any political subdivision of a 
        State, one or more political subdivisions of a State, or a 
        State and one or more of its political subdivisions, or by any 
        agency, department, office, authority, or other instrumentality 
        of a State, any political subdivision of a State, one or more 
        political subdivisions of a State, or a State and one or more 
        of its political subdivisions.
            (2) Political subdivision.--The term ``political 
        subdivision'' includes any city, county, town, township, 
        parish, village, or other general purpose political subdivision 
        of a State and any school, utility, fire, or tax district, or 
        other special purpose political subdivision of a State.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (4) State.--The term ``State'' means the States of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        Guam, the Virgin Islands, American Samoa, and any other 
        territory or possession of the United States.

SEC. 206. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated to the Secretary for 
carrying out this title such sums as may be necessary for each fiscal 
year.
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