I 111th CONGRESS 1st Session H. R. 3128 IN THE HOUSE OF REPRESENTATIVES July 8, 2009 Mr. Ellison introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Federal Reserve Act to authorize Federal Reserve Banks to examine the methodologies of used by nationally recognized statistical rating organizations in analyzing and rating asset backed securities and structured finance products.

1.

Examination authority with respect to nationally recognized statistical rating organizations

Section 13 of the Federal Reserve Act is amended by adding at the end the following new paragraph: (15)

Examination authority with respect to nationally recognized statistical rating organizations

(A)

In general

The Board may authorize any Federal reserve bank to examine the methodologies used by nationally recognized statistical rating organizations in analyzing and rating asset backed securities and structured finance products. Such examinations shall be subject to such limitations, restrictions, and regulations as the Board may prescribe. (B)

Definitions

For purposes of this paragraph: (i)

Asset backed security

The term asset backed security means— (I)a security that is primarily serviced by the cash flows of a discrete pool of receivables or other financial assets (including mortgages), either fixed or revolving, that by their terms convert into cash within a finite time period, plus any rights or other assets designed to assure the servicing or timely distributions of proceeds to the security holders; and (II)such other security as the Board may prescribe. (ii)

Nationally recognized statistical rating organization

The term nationally recognized statistical rating organization has the same meaning as in section 3(a)(62) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(62)). (iii)

Security

The term security has the same meaning as in section 3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)). (iv)

Structured finance product

The term structured finance product means a product that includes— (I)the pooling of assets (either cash-based or synthetically created); (II)the tranching of liabilities that are backed by such assets; (III)de-linking of the credit risk of such assets from the credit risk of the originator (usually through use of a finite-lived, standalone financing vehicle); or (IV)such other elements as the Board may prescribe. .