[Congressional Record Volume 152, Number 90 (Wednesday, July 12, 2006)]
[House]
[Pages H5080-H5094]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            CREDIT RATING AGENCY DUOPOLY RELIEF ACT OF 2006

  The SPEAKER pro tempore. Pursuant to House Resolution 906 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the State of the Union for the consideration of the bill, H.R. 2990.

                              {time}  1323


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 2990) to improve ratings quality by fostering competition, 
transparency, and accountability in the credit rating agency industry, 
with Mr. Boozman in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the rule, the bill is considered read the 
first time.
  The gentleman from Ohio (Mr. Oxley) and the gentleman from 
Pennsylvania (Mr. Kanjorski) each will control 30 minutes.

[[Page H5081]]

  The Chair recognizes the gentleman from Ohio.
  Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, in response to the largest corporate scandals in U.S. 
history, Congress passed the Sarbanes-Oxley Act strengthening the role 
of gatekeepers such as auditors, boards of directors, audit committees, 
and equity analysts. We now turn our attention to another gatekeeper, 
the credit rating agency, and Congressman Fitzpatrick's H.R. 2990, the 
Credit Rating Agency Duopoly Relief Act.
  Credit ratings serve a vital function in our capital market system, 
providing investors with an understanding of the creditworthiness of 
corporations and municipalities with respect to debt and other 
securities. As evidenced by the failures in the rating of Enron and 
WorldCom, who were given investment grade ratings by Moody's and 
Standard & Poor's just days before declaring bankruptcy, the credit 
rating industry is in drastic need of increased competition and 
improved transparency.
  Currently, the SEC designates ratings agencies as nationally 
recognized statistical ratings organizations, or NRSROs, through an 
opaque process that provides applicants little guidance on the 
substance and procedure by which they will be evaluated. Currently, 
only five rating agencies are designated as NRSROs by the SEC. 
Understandably, many more aspire to attain that designation, as NRSRO 
status confers a significant competitive advantage. However, new 
applications often languish for years without an up or down vote on 
admission into this elite club. In fact, the Department of Justice 
commented upon the SEC designation process in 1998, calling it a 
``nearly insurmountable barrier to entry.''
  The SEC's opaque designation process has created an artificial 
government-sponsored barrier to entry that has stifled competition and 
helped the two top rating agencies, Moody's and Standard & Poor's, 
garner some 80 percent of the market share. Without true competition of 
this industry, fees have skyrocketed and ratings quality has 
deteriorated. To put it mildly, this is not a transparent and efficient 
mark with robust competition.
  Wanting to understand an industry with such a significant impact on 
the markets, Congress directed the SEC to examine credit rating 
agencies as part of the Sarbanes-Oxley Act. Since the release of the 
SEC's report on rating agencies in January 2003, the Committee on 
Financial Services and its Subcommittee on Capital Markets, Insurance 
and Government-Sponsored Enterprises through its chairman, Richard 
Baker, have held five hearings on this subject, two of those hearings 
focused on H.R. 2990. Witnesses from the SEC, industry, academia, think 
tanks, and the rating agencies themselves echoed the problem areas 
highlighted by the SEC; namely, barriers to entry leading to a lack of 
competition, conflicts of interest, poor transparency of agencies' 
rating methodologies, and a lack of accountability. Mr. Fitzpatrick's 
bill is the product of this comprehensive examination.
  In his testimony of this past May before the Committee on Financial 
Services, our former colleague, SEC Chairman Cox, expressed support for 
the goals of H.R. 2990, and requested enhanced authority in this area. 
In a June 2006 letter to Ranking Member Kanjorski, Mr. Cox stated, 
``You also asked whether the quality of credit ratings concerns me. My 
answer is most assuredly yes. In fact, transparency, competition, and 
greater oversight, the principles I mentioned during my testimony 
before the House Financial Services Committee on May 3, 2006, are, in 
my view, important means to achieve the end of ensuring the high 
quality of credit ratings.'' The principles cited by Mr. Cox are the 
very principles of Mr. Fitzpatrick's legislation before us.
  In addition, SEC Commissioners Paul Atkins and Cynthia Glassman have 
expressed their disapproval with the current designation system, and 
Mr. Atkins has expressed support for a registration approach like the 
one embodied in this bill. SEC Commissioner Roel Campos has also 
expressed a need for legislation that deals with conflicts, increased 
transparency, and provides for SEC examination.
  Mr. Fitzpatrick's bill follows the regulatory regimes applied to 
broker-dealers and investment advisors. In doing so, it rejects 
regulation controlled by the SEC in favor of the market-based approach 
that has driven our securities laws since the 1930s.
  H.R. 2990 removes the SEC's designation process, and in its place 
gives rating agencies who have issued ratings for 3 years the option of 
registering as NRSROs. A voluntary registration system will level the 
playing field for all rating agencies and inject much needed 
competition into this industry. As we have seen time and time again in 
other markets, true competition begets lower prices and better 
performance. When dealing with investor protection, it is all the more 
critical to ensure that healthy competition exists, yielding more 
accurate and reliable ratings.
  In addition, H.R. 2990 promotes transparency and empowers investors 
by requiring registrants to disclose the methodologies by which they 
generate ratings. It requires rating agencies to provide short, medium, 
and long-term performance statistics, and to make all information and 
documents submitted to the SEC publicly available. This will give the 
market a clearer understanding of the agencies that are rating debt. 
The bill also requires that rating agencies maintain a chief compliance 
officer to oversee compliance with the securities laws and protects 
market stability, providing that the voluntary regime will not go into 
effect until January 2008.
  To insulate the rating agencies from overreaching legislation, H.R. 
2990 affirms that the Federal Government may not intrude into rating 
agencies' methodologies or the ratings process.
  Finally, I have concerns about the conflicts of interest which plague 
this industry. Ratings firms have expanded into new areas which, many 
commentators have suggested, further compromise their objectivity.

                              {time}  1330

  In addition, it has been alleged that leading rating agencies engage 
in certain abusive practices to the detriment of smaller market 
players. H.R. 2990 requires disclosure of conflicts of interest and 
prohibits such anti-competitive practices.
  The many hours that the Committee on Financial Services and Mr. 
Fitzpatrick have spent on this issue have shown the problems cited by 
the SEC report are best rectified through a system of voluntary 
registration open to all eligible rating agencies. This will eliminate 
barriers to entry, promote competition, and do so using the least 
restrictive means of regulation.
  I urge all Members to support this important bill.
  Mr. Chairman, I reserve the balance of my time.
  Mr. KANJORSKI. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, our capital markets rely on the independent assessment 
of financial strength provided by credit raters. The bill before us, 
however, would decrease the quality of credit ratings because it would 
dramatically alter the way in which government identifies entities to 
issue the credit ratings used for essential regulatory purposes. I 
therefore oppose H.R. 2990.
  In the 1970s, the Securities and Exchange Commission created 
nationally recognized statistical rating organizations. It is not a 
very sexy term and not well understood, but those are the little 
fellows that are called in to evaluate bonds and all types of 
instruments of debt and other materials that are sold throughout our 
financial system to pension funds and all others. They created these 
organizations in a rulemaking on the capital levels that brokers and 
dealers must hold. Since then, the term, with its inference to quality, 
credible, and reliable ratings has become embedded in numerous Federal, 
State, and local statutes, rules, and regulations.
  Many private parties have also included references to ``nationally 
recognized'' agencies in the terms of their contracts, corporate 
bylaws, and pension trust agreements. Foreign governments and 
international bodies have used the concept in their accords and codes, 
too. In considering any bill to modify the process for identifying 
``nationally recognized'' agencies, we must, therefore, keep in mind 
the need to maintain high quality ratings. It is this credible and 
reliable standard on

[[Page H5082]]

which investors rely. We should not lightly abandon this standard.
  Critics of the present designation system have raised legitimate 
concerns about competition. I agree with the supporters of H.R. 2990 
that increasing competition in the credit ratings used for regulatory 
purposes is a desirable goal. I further agree that the current 
designation process should be improved.
  To achieve its objectives of greater competition, however, H.R. 2990 
seeks to make statutory changes that will come at a dangerous cost. The 
bill, through its voluntary registration regime, will increase the 
number of ``nationally recognized'' agencies without providing 
sufficient authority to assure the issue ratings are credible and 
reliable. We must achieve equilibrium in these matters by balancing the 
desire to increase the quantity of approved credit raters with the need 
to ensure that their ratings are of a consistently high quality.
  The minimum standard set forth in H.R. 2990 that allows any credit 
rater to obtain the ``nationally recognized'' designation after 3 years 
of experience are akin to granting a driver's license to anyone who 
meets a 3-year residency requirement. We know, however, to keep our 
roads safe, every potential driver must pass one or more quality 
assurance tests administered by a third party before getting a license. 
Why should we hold those rating agencies that serve as gatekeepers to 
our capital markets to a lower oversight standard?
  Investor advocates have also concluded that quality should be an 
important factor in identifying ``nationally recognized'' agencies. The 
AFL-CIO, for example, has noted that replacing the concept of approved 
raters, ``with a mere registration process without substantive 
oversight will be harmful to investors,'' and ``ultimately to the 
functioning of our credit markets.''
  In a recent letter, the Consumer Federation of America has 
additionally observed that the central provision of H.R. 2990 is 
``fatally flawed.'' In competitive markets, ``some credit rating 
agencies will invariably compete based on the leniency of their ratings 
methodology. That is not good for investors or for the integrity and 
efficiency of the markets.''
  Moreover, H.R. 2990 could allow history to repeat itself. In the wake 
of the savings and loan crisis, we required that the debt securities 
held in portfolios by financial institutions must be of investment 
grade as determined by a ``nationally recognized'' agency.
  I may point out, in response to my colleague, the chairman of my 
subcommittee, Mr. Baker, he seemed to indicate that the cause of the 
S&L disaster was that the rating agencies made mistakes. Quite to the 
contrary. The disaster was that the rating agencies were not used to 
determine investment grade instruments held in their portfolios, and 
that only occurred after the S&L disaster.
  This bill's failure to ensure that such ratings continue to be 
credible and reliable could one day create another regrettable 
situation whereby the taxpayers need to finance a bailout of the 
deposit insurance funds. Moreover, this legislation threatens the 
strength of the Securities Investors Protection Corporation, which 
protects investors against fraud.
  Less than 4 years ago, Congress wisely adopted the standards in the 
Sarbanes-Oxley Act to strengthen financial reporting, restore investor 
confidence, and assure the integrity of our capital markets. In an 
effort to promote competition, however, H.R. 2990 would weaken the 
quality of our ratings, thereby damaging investor confidence and the 
integrity of our markets going forward. It is, in other words, a step 
backwards.
  In sum, Mr. Chairman, I find such developments are highly regrettable 
today and I urge my colleagues to reject H.R. 2990.
  In response to the chairman of our committee's quoting from a letter 
addressed to me by Chairman Cox, our former colleague, he failed to 
read the second paragraph of Mr. Cox's letter, under part B. He 
properly read the first phase, and I won't repeat that, but Mr. Cox 
said, ``In the weeks and months ahead, the commission,'' speaking of 
the Securities and Exchange Commission, ``and its staff will continue 
to consider potential ways by which we can help facilitate the issuance 
of high quality ratings using our existing regulatory authority, 
including the adoption of an existing rulemaking proposal in some form 
or other approaches,'' thus indicating that the SEC has not had the 
opportunity to fully address this problem.
  The SEC has not been called to testify before the committee on the 
consideration of this bill, and the fact is that of the five hearings 
held by this committee, at least four of the five occurred without the 
concept of the piece of legislation we are considering today.
  I sympathize with the makers of this. I know they want to do the 
right thing. But speed to get a bill passed, to create an on-demand 
registration of a new entity that is so critical to trillions of 
dollars of instruments of debt should not pass this House without 
realizing the potential consequences, and they are great.
  I concede rating agencies that exist today have made mistakes in 
Enron and WorldCom, but I recall, and I guess I have served on the 
committee a little longer than most, but Mr. Oxley was certainly in the 
Congress, not on the committee at the time, but during the S&L 
disaster, I recall a very famous American, who is an economist and 
served in very high appointive office in the Federal Reserve, 
testifying before our committee that he had evaluated, for a 
professional fee, 20 entities, S&Ls, and had found them to be sound. 
Many of them failed within 4 months of his evaluation. Actually, 19 of 
the 20 he evaluated failed.
  This is not kid's play. This is not a bean bag. This is very serious 
rating information that investors across the country, indeed across the 
world rely upon. Quality is clearly as important as quantity. We can 
have both. Just taking a greater consideration and using the expertise 
and availability of the Securities and Exchange Commission may do us 
well.
  Mr. Chairman, I reserve the balance of my time.
  Mr. OXLEY. Mr. Chairman, I am now pleased to yield 2 minutes to the 
gentleman from Georgia (Mr. Price), a valuable member of the committee.
  (Mr. PRICE of Georgia asked and was given permission to revise and 
extend his remarks.)
  Mr. PRICE of Georgia. Mr. Chairman, I want to thank the chairman and 
the subcommittee chairman for their leadership on this issue, and I 
want to thank Mr. Fitzpatrick, the gentleman from Pennsylvania. I 
appreciate his leadership on this and on so many other issues. The 
citizens of Pennsylvania are truly fortunate to have you fighting for 
them, and I am honored to call you a colleague and a friend.
  Mr. Chairman, this bill, H.R. 2990, addresses credit ratings, or 
judging the financial worthiness of companies. Credit ratings play a 
real and significant role in our economy. Investors rely on these 
ratings to determine risks of default of companies, both large and 
small, as well as governmental entities. Currently, these ratings are 
often the determining factor as to whether companies and, hence jobs, 
will expand, or whether local governments are able to finance major 
municipal improvement projects.
  Presently, competition is severely lacking among credit rating 
agencies, as there are only five companies designated by the SEC. The 
current process fails to provide a reasonably clear path for potential 
new rating agencies. H.R. 2990 solves this problem by establishing an 
unambiguous registration process with appropriate oversight to ensure 
integrity and reliability in the rating process.
  In addition to facilitating competition, the legislation would 
provide critically important information currently not available to 
investors. The bill would require disclosure of ratings processes so 
investors can better evaluate the quality of the ratings themselves. 
Further, rating organizations would be required to publicly disclose 
their policies relating to conflicts of interest and their 
organizational structure. Finally, they would be held accountable for 
ratings they issue if they don't follow their disclosed policies.
  Mr. Chairman, these are all extremely important advances and 
improvements for our entire economy, and I urge adoption of H.R. 2990.
  Mr. KANJORSKI. Mr. Chairman, I yield 4 minutes to the gentlewoman 
from New York (Mrs. Maloney).
  Mrs. MALONEY. Mr. Chairman, I thank the gentleman for yielding and

[[Page H5083]]

for his leadership, and I rise in opposition of the underlying bill, 
H.R. 2990, and in support of the Kanjorski substitute.
  I believe that all of us in this body support the promotion of 
healthy competition and improved transparency and accountability and 
independence in the rating agency industry. I certainly am concerned 
about the transparency and accountability of the industry. However, I 
believe that this particular bill will do more harm than good.
  While the bill has been somewhat improved through various manager's 
amendments, I still have serious concerns regarding the bill that is 
before us. The bill contains a free-for-all in the ratings market 
without the usual market protections against abuse. For example, the 
bill allows almost anyone to register as a rating agency and issue 
ratings, but insulates rating agencies from lawsuits.
  The fact that the bill does not provide adequate rating quality 
assurance is of grave concern to me for safety and soundness. Taking 
away the SEC's seal of approval for rating agencies will cause 
investors to possibly lose confidence in the markets because they are 
rightly concerned about ratings shopping or simply inaccurate ratings. 
We spent the last several years working to overcome the crisis in 
investor confidence caused by corporate governance scandals, and this 
is absolutely not the time for taking risks in this area.

                              {time}  1345

  Mr. Chairman, I also have procedural concerns regarding how this bill 
was advanced through the committee on which I serve. As you know, the 
SEC was not asked to participate in either of the two hearings that 
this committee held on this legislation. And given the role that the 
SEC plays now in effectively overseeing rating agencies and the role it 
will play in administering this legislation, I think we should receive 
testimony from them before taking legislative action.
  This is a very complicated issue that could have a tremendous effect 
on the capital markets both here and abroad. I note that other 
international regulators have recently taken a very different approach 
than the one advocated by this bill.
  While I am not prepared today to say which approach is better, I 
think it would be prudent for us to learn more from the SEC and other 
international regulators on credit rating agencies, and to determine 
whether we want to move towards greater international harmonization of 
standards, as opposed to going forward with this new change.
  Simply put, before rushing to judgment, we need to better understand 
all of the impacts that could result from our actions here today. 
Rushing this bill to the floor is not the way to reach sound public 
policy. We need to understand all of the consequences of this change 
and the effect it will have on the quality of our rating agencies.
  So I urge my colleagues to oppose H.R. 2990 and to support the 
Kanjorski amendment.
  Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentlewoman from 
Pennsylvania (Ms. Hart).
  Ms. HART. Mr. Chairman, I thank the gentleman for yielding me this 
time.
  I had been a member of the Financial Services Committee, the 
gentleman's committee, and have worked on a number of different issues 
with him. I respect the work he has done on this issue, and also the 
sponsor, Mr. Fitzpatrick's work, and I rise in support of the bill.
  The Credit Rating Agency Duopoly Relief Act will provide more 
transparency. For far too long only two rating agencies have had 80 
percent of the market share. That is because they have an advantage 
under the current system. This bill will bring more competition and 
innovation into the credit rating agencies. This is extremely 
important. In the markets of today where we have had questions about 
the veracity of reported information, we need more competition among 
agencies and more transparency.
  While there are 130 credit rating agencies in the financial markets, 
only five are designated as nationally recognized statistical rating 
organizations. Blocking competition in the marketplace and stifling 
innovation is never a good thing. Our laws should encourage open 
competition and a fair marketplace.
  The basic principles of competition and fairness make our marketplace 
dynamic, and credit rating agencies should not be immune to these 
principles. By blocking entry to the market, mistakes have been made. 
The current certified agencies listed Enron as a safe investment and 
WorldCom as investment grade quality right before they filed for 
bankruptcy.
  As a former member of the Financial Services Committee, I have worked 
closely on these issues surrounding both Enron and WorldCom after the 
collapse, and I am pleased we are taking this commonsense approach to 
strengthen our markets and provide consumers with more choice, more 
transparency and more responsible information.
  Specifically, this bill will open the credit rating agency market by 
ensuring that more agencies will be able to get this national rating, 
ending the current requirement to specific business models. Encouraging 
competition and transparency in this industry will improve quality, and 
that is always better for the market.
  Mr. KANJORSKI. Mr. Chairman, I yield such time as he may consume to 
the gentleman from Massachusetts (Mr. Frank), the ranking member of the 
Committee on Financial Services.
  Mr. FRANK of Massachusetts. Mr. Chairman, I thank the ranking member 
of the subcommittee for his leadership on this. The goals here do not 
divide us; the methods do. Maybe it is a little bit of a role reversal, 
but I think, as the gentleman from Pennsylvania has made clear, we 
believe that the SEC ought to be relied on more fully here.
  I understand the SEC supports the goals of this. We support the goals 
of this. The critical question is the implementation. We think this 
prematurely takes some decision-making that we ought to await for SEC 
input. We are talking about a very tough decision to make here. It is a 
lot of power to give an entity to be a rating agency.
  People have alluded to the great power the two existing ones have. It 
is important that we have complete assurance for ourselves that the 
process we put in place for new rating agencies be very thoroughly 
checked out and very much prevented against abuse. Competition is a 
good thing, but not competition that could be a race to the bottom; and 
we regard SEC as an important part of this.
  That is why the substitute that my friend from Pennsylvania has holds 
off on making some of these decisions, we believe, too hastily, and 
instead more deeply involves us with the SEC. We are not talking about 
waiting 5 or 10 years, but it seems imprudent to go forward without 
waiting for a full deliberation from the SEC.
  There are other companies eager to get into the business, but the 
fact that other companies are eager to get into the business should not 
be driving us any more than the reluctance of the existing companies to 
have new people in the business. Both sets of considerations should not 
be driving us, neither to protect the existing businesses nor to enable 
the new ones.
  What we ought to be doing is focusing on the public policy process 
for deciding who gets to do this, and we do not believe we are yet at 
the point where we can do that in the ideal fashion, and we will be 
better off if we wait for the SEC to give us its guidance.
  Mr. OXLEY. Mr. Chairman, I yield 8 minutes to the author of the 
legislation, the gentleman from Pennsylvania (Mr. Fitzpatrick).
  Mr. FITZPATRICK of Pennsylvania. Mr. Chairman, I thank Chairman Oxley 
and subcommittee Chairman Baker for their considerable leadership on 
this issue.
  There have been no less than five hearings over the last two terms of 
Congress, dozens of witnesses and approaching 1,000 pages of 
transcribed testimony, all pointing to the unavoidable conclusion, 
which is that it is vital that Congress bring competition, transparency 
and accountability to the credit rating industry in this Nation.
  Mr. Chairman, credit rating agencies have been issuing ratings on the 
likelihood of an issuer's default on debt payments since the early 20th 
century. Today, credit rating agencies rate companies, countries and 
bonds. Despite being often underestimated and overlooked, their power 
is immense. Credit

[[Page H5084]]

rating agencies have a great impact on the bottom line of companies, 
municipalities and school districts. The better the credit rating, the 
lower the interest rate that the borrower must pay.
  This expansive influence finally came into question because of the 
recent corporate scandals and the fact that the two largest NRSROs, 
Standard & Poor's and Moody's, rated Enron and WorldCom at investment 
grade just prior to their bankruptcy filings. Essentially, they told 
the market that Enron and WorldCom were safe investments, even though 
their problems were very apparent in the marketplace. As a result, 
reforming the rating agency industry has been the subject of much 
debate in the House Committee on Financial Services.
  S&P's and Moody's monitoring and reviewing of Enron and WorldCom fell 
far below the careful efforts one would have expected from 
organizations whose ratings hold so much importance. And Enron and 
WorldCom were not their only problems. But what are the other options 
that are out there?
  There are 130 credit rating agencies in the financial market; 
however, only five are rated and designated as NRSROs by the SEC. This 
label is the root of the problem. The SEC coined the term NRSRO without 
defining it in its 1975 rule on net capital requirements when it 
obligated broker-dealers to hold more capital for those bonds rated 
junk by a NRSRO. Since then, other regulators in the private investment 
community have taken up the term, but also without defining it. As a 
result, credit ratings matter only if they are issued by an NRSRO.
  The commission still has never defined the term, and it has been over 
30 years. It is more than naive to assume that the SEC will actually 
define it now. Their track record is not encouraging.
  To receive the illusive distinction, companies must be nationally 
recognized. This artificial barrier to entry has created a chicken-and-
the-egg situation for non-NRSRO credit rating agencies trying to enter 
this industry. As a result of the artificial barrier to entry, there 
are only five NRSROs. Reputable credit rating firms have been unable to 
receive this distinction after trying for as long as a decade. Firms 
like Egan Jones in my home State of Pennsylvania receive no explanation 
from the SEC because no process actually exists.
  This SEC-imposed barrier to entry has consolidated the industry, thus 
fostering a duopoly. Moody's and S&P enjoy over 80 percent of the 
market share and rate 99 percent of the debt in the market. As a 
result, Moody's and S&P are raking in record fees. Since 2000, Moody's 
and S&P have earned average annual returns on assets of 37 and 39 
percent respectively over a 6-year period. This compares to the average 
return on assets over the same period earned by U.S. manufacturing 
firms of less than 5 percent per year.
  These excessive profits are government-granted to those two NRSROs by 
virtue of the special status granted to them by the government. As a 
result of this lack of competition, the quality of ratings has 
decreased, prices are inflated, innovation has been stifled, and 
anticompetitive industry practices have been allowed in conflicts of 
interest, like tying, notching and unsolicited ratings, have gone 
unchecked.
  Mr. Chairman, in the wake of the seminal failure by S&P and Moody's 
in the WorldCom and Enron scandals, we must ensure integrity in the 
credit rating process. H.R. 2990 would inject greater competition, 
transparency and accountability in the credit rating industry. As a 
result, prices and anticompetitive practices will be reduced, credit 
rating quality will improve, and firms will be forced to innovate.
  This view is shared by the Bond Market Association, the Association 
for Financial Professionals, the Financial Executives International, 
Investment Company Institute, and The Financial Services Roundtable, 
and I will submit their letters of support for the Record.
  Mr. Chairman, there is a lot of talk in this town about reform and 
transparency and managing conflicts of interest. This bill, I would 
submit, meets each of those challenges, and I would like to leave you 
with a quote right from the horse's mouth.
  The SEC stated: ``The greater competition in the market for credit 
ratings and analysis could provide for more credible and reliable 
ratings, and greater competition could also stimulate innovation in the 
technology and methods of analysis for issuing credit ratings, which 
could further lower barriers to entry.''
  I submit H.R. 2990 would do just that. I strongly urge a ``yes'' vote 
on H.R. 2990 to ensure integrity in the credit rating industry.

                                  The Bond Market Association,

                                                    July 10, 2006.
     Hon. Michael Fitzpatrick,
     House of Representatives,
     Washington, DC.
       Dear Representative Fitzpatrick: I applaud your efforts on 
     legislation to reform the credit rating agency industry. The 
     significant growth in the global capital markets in recent 
     years has increased the importance of credit quality 
     analysis. Boosting competition among credit rating agencies, 
     as your legislation, the Credit Rating Agency Duopoly Relief 
     Act (H.R. 2990), seeks to do, assures this critical industry 
     will remain robust and innovative.
       I appreciate that the version of H.R. 2990 approved last 
     month by the House Financial Services Committee addresses 
     concerns of Association members with an earlier version of 
     the legislation. Specifically, the bill would no longer 
     compel registration of a credit rating agency with the 
     Securities and Exchange Commission. The amended version of 
     H.R. 2990 also expands the definition of credit rating agency 
     to include any person in the business of issuing credit 
     ratings on the Internet or other readily accessible means for 
     free or for a reasonable fee. Association members viewed the 
     previous legislation as both too narrow--deeming a rating 
     public only if it was disseminated on the Internet--and too 
     broad--including companies who produce ratings not used for 
     regulatory purposes. The changes included in the new 
     legislation will help foster competition in the industry.
       Again, I commend your leadership on this important issue. 
     We support H.R. 2990 and look forward to speedy action on the 
     bill in the House.
           Sincerely,
                                                     John R. Vogt,
      Executive Vice President.
                                  ____

                                         Association for Financial


                                                Professionals,

                                      Bethesda, MD, July 10, 2006.
     Hon. J. Dennis Hastert,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Mr. Speaker and Madam Leader: On behalf of the 15,000 
     members of the Association for Financial Professionals (AFP), 
     I urge the House to approve the ``Credit Rating Agency 
     Duopoly Relief Act'' (H.R. 2990) that the House Financial 
     Services Committee recently approved by voice vote.
       Credit rating agencies and investor confidence in the 
     ratings they issue are vital to the efficient operation of 
     global capital markets. AFP's research has consistently shown 
     that confidence in rating agencies and their ratings is low 
     and has continued to diminish over the past few years.
       One of the root problems with this market is the U.S. 
     Securities and Exchange Commission's Nationally Recognized 
     Statistical Rating Organization (NRSRO) designation, which 
     has erected an artificial barrier to competition. This 
     barrier has led to a concentration of market power among the 
     recognized rating agencies and has removed the incentives for 
     needed innovation in the global credit ratings market. The 
     ``Credit Rating Agency Duopoly Relief Act'' (H.R. 2990), 
     would eliminate this regulatory barrier by reforming the 
     process that the SEC uses to designate Nationally Recognized 
     Statistical Rating Organizations. H.R. 2990 establishes a new 
     registration process setting a clear path to NRSRO 
     designation. In addition, the legislation would provide 
     prudent oversight to ensure that registered credit rating 
     agencies continue to issue credible and reliable ratings.
       As approved by the House Financial Services Committee, H.R. 
     2990 will foster competition in the global credit ratings 
     market. This competition will stimulate innovation and 
     improve the quality of information available to investors 
     and, as a result, restore confidence in the credit ratings 
     market.
       Thank you for your support on this important issue.
           Sincerely,
                                                        Jim Kaitz,
     President and CEO.
                                  ____



                                 Investment Company Institute,

                                    Washington, DC, July 10, 2006.
     Hon. J. Dennis Hastert,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Mr. Speaker and Madam Leader: The Investment Company 
     Institute urges the House to approve H.R. 2990, the ``Credit 
     Rating Agency Duopoly Relief Act of 2005,'' legislation 
     introduced by Rep. Michael Fitzpatrick (R-PA) and reported by 
     the Financial Services Committee. The legislation will 
     benefit investors and the securities markets by paving the 
     way for increased competition in the credit ratings industry.

[[Page H5085]]

       The SEC's current ``Nationally Recognized Statistical 
     Rating Organization'' (NRSRO) designation process stifles 
     competition and presents barriers for new entrants to compete 
     with currently designated NRSROs. H.R. 2990 establishes a 
     registration process through which additional rating agencies 
     become NRSROs, while simultaneously granting the Commission 
     appropriate authority to ensure the integrity and quality of 
     credit ratings. The bill also brings much needed sunlight to 
     credit ratings by requiring disclosure of an NRSRO's rating 
     criteria, its methodologies and policies, how an NRSRO 
     addresses conflicts of interest (as well as the conflicts 
     themselves), and the organizational structure of an NRSRO.
       The Institute and its members have a longstanding interest 
     in credit ratings. Mutual funds employ credit ratings in a 
     variety of ways--to help make investment decisions, to define 
     investment strategies, to communicate with their shareholders 
     about credit risk, and to inform the process for valuing 
     securities. Most significantly for Institute members is the 
     role of credit ratings in the operation of money market 
     mutual funds, which currently have some $2.1 trillon in 
     assets. Money market funds are governed by Rule 2a-7 under 
     the Investment Company Act, which limits these funds to 
     investing in securities either rated in the two highest 
     short-term rating categories by an NRSRO, or determined by 
     the fund board to be of comparable quality.
       Given the importance of credit ratings to mutual funds and 
     fund shareholders, we greatly appreciate the work of the 
     Financial Services Committee on this issue. Accordingly, we 
     urge Members to support this important reform legislation and 
     vote aye on final passage. Please do not hesitate to contact 
     me directly, or Dan Crowley in the Institute's Office of 
     Government Affairs, (202) 326-5962, if we can provide you 
     with any additional information.
       With very best regards.
           Sincerely,
     Paul Schott Stevens.
                                  ____



                            The Financial Services Roundtable,

                                    Washington, DC, July 10, 2006.
     Hon. Michael G. Fitzpatrick,
     House of Representatives,
     Washington, DC.
       Dear Congressman Fitzpatrick: On behalf of the members of 
     The Financial Services Roundtable, I urge you to vote for 
     H.R. 2990, ``The Credit Rating Agency Duopoly Relief Act of 
     2006.'' It would facilitate the creation of much needed 
     competition in the credit ratings industry. Additionally, we 
     believe that increased competition for credit rating agencies 
     will lower the costs to financial institutions, add integrity 
     to the credit rating process, and increase earnings for 
     investors.
       Congressional action in the credit rating industry is 
     necessary. H.R. 2990 will help facilitate structural reform 
     at the Securities and Exchange Commission (SEC) concerning 
     the oversight of credit rating agencies with greater 
     competition premised on a competitive market place 
     philosophy.
       H.R. 2990 should be enacted into law this year, 
     specifically, for the following reasons:
       There is a lack of competition among credit rating 
     agencies. This is evidenced by the SEC designating only five 
     companies as Nationally Recognized Statistical Recognized 
     Organizations (NRSROs)--two of which control approximately 
     80% of the market. The current designation process is 
     outdated and inefficient. H.R. 2990 would address this 
     problem by establishing an unambiguous SEC registration 
     process with commensurate oversight to ensure integrity in 
     the ratings process. Moreover, to be an NRSRO, a credit 
     rating agency must have been in business for at least three 
     consecutive years and be registered under section 15E of the 
     Securities Exchange Act of 1934.
       This legislation would require increased disclosure of the 
     ratings process, thus enabling the investor to make better 
     informed decisions.
       Many NRSROs have a conflict of interest concerning the 
     independence and quality of their ratings. H.R. 2990 resolves 
     this issue by requiring companies to publicly disclose any 
     conflicts of interest relating to the issuance of credit 
     ratings.
       The Financial Services Roundtable represents 100 of the 
     largest integrated financial services companies providing 
     banking, insurance, and investment products and services to 
     the American consumer. Member companies participate through 
     the Chief Executive Officer and other senior executives 
     nominated by the CEO. Roundtable member companies provide 
     fuel for America's economic engine, accounting directly for 
     $50.5 trillion in managed assets, $1.1 trillion in revenue, 
     and 2.4 million jobs.
       In conclusion, we urge all members to vote for final 
     passage of H.R. 2990, ``the Credit Rating Agency Duopoly 
     Relief Act of 2006.'' If you or your staff have any questions 
     or would like to discuss these issues further, please call me 
     or Irving Daniels at 202-289-4322.
           Best regards,
                                                   Steve Bartlett,
     President and CEO.
                                  ____

                                                   Association for


                                      Financial Professionals,

                                                    July 10, 2006.
     Hon. J. Dennis Hastert,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Mr. Speaker and Madam Leader: The undersigned 
     associations, representing a broad array of financial 
     services firms, support H.R. 2990, the Credit Rating Agency 
     Duopoly Relief Act, and urge its passage by the House. As 
     associations representing mutual funds, corporate issuers, 
     broker/dealers and institutional investors, we all agree that 
     H.R. 2990 would facilitate much needed competition in the 
     credit ratings industry.
       Credit ratings play a significant role in the securities 
     markets as well as the economy as a whole. Investors rely on 
     ratings to measure relative default risks of large and small 
     companies, as well as government entities. Ratings produced 
     by Nationally Recognized Statistical Rating Organizations 
     (NRSROs) are often the determining factor as to whether 
     companies will expand or local governments can finance major 
     municipal projects. Furthermore, ratings assigned by NRSROs 
     play a significant role in determining the permissible 
     instruments that certain institutional investors can hold.
       Currently, competition is severely lacking among credit 
     rating agencies as the SEC has designated only five companies 
     as NRSROs--two of which overwhelmingly dominate the market. 
     The current process for attaining the NRSRO designation fails 
     to provide a reasonably clear path for potential new 
     aspirants to follow. H.R. 2990 solves this problem by 
     establishing an unambiguous SEC registration process with 
     commensurate oversight to ensure integrity in the ratings 
     process.
       In addition to facilitating competition, the legislation 
     would provide critically important information, currently 
     unavailable to investors, about the methodologies NRSROs use 
     to assign ratings. The bill would not dictate how NRSROs must 
     operate but instead require disclosure of ratings processes 
     so investors can better evaluate the quality of ratings. 
     Additionally, NRSROs would be required to publicly disclose 
     their policies relating to conflicts of interest and their 
     organizational structure. Finally, NRSROs would be held 
     accountable for ratings they issue in contravention to their 
     disclosed policies.
       We thank the Financial Services Committee for its work on 
     NRSRO reform over the past two Congresses. H.R. 2990 
     significantly reforms the credit ratings industry by 
     increasing competition, providing appropriate SEC oversight, 
     enhancing transparency, and heightening accountability--
     reforms that will greatly benefit investors and securities 
     markets as a whole. Accordingly, we urge Members to support 
     this much-needed legislation and vote aye on final passage.
           Respectfully,
       Association for Financial Professionals.
       Investment Company Institute.
       The Financial Services Roundtable.

  Mr. KANJORSKI. Mr. Chairman, I reserve the balance of my time.
  Mr. OXLEY. Mr. Chairman, I yield 3 minutes to the gentleman from 
Louisiana (Mr. Baker), the chairman of the Capital Markets 
Subcommittee.
  Mr. BAKER. Mr. Chairman, I thank the gentleman for yielding and wish 
to compliment him for his leadership in this matter, as well as that of 
Mr. Fitzpatrick who has put many hours into this subject matter and, I 
think, has helped to produce legislation worthy of this House's 
consideration.
  I wish to enter into the Record the statement of administration 
policy issued July 12 of this year regarding the passage of H.R. 2990, 
the relevant portion being: ``This legislation would enable more credit 
rating agencies to qualify nationally under Securities and Exchange 
Commission regulation. The bill requires credit rating agencies to 
disclose their performance records, methodologies and any conflicts of 
interest. The administration looks forward to working with Congress as 
we move towards these goals.''
  It is clear the administration and the members of the Committee on 
Financial Services have found H.R. 2990 not only to be good legislation 
but necessary to be adopted; and why is that so?
  If one were to ask how could you become a credit rating agency and 
get a part of this lucrative business today, the process is unclear. It 
is much like the old adage relative to identifying art, ``I know it 
when I see it.''
  It has been some 30 years since the SEC adopted its current 
methodology for establishing this recognition, and yet we do not know 
today how one can successfully become an NRSRO, much less once you are 
one, who is it that looks over your shoulder, and should they find 
inappropriate behavior, how is one unregistered or decommissioned. That 
process is also unclear.
  What we do know from the record is that very lucrative companies have 
engaged in a government-granted business operation, have garnered 
significant profits, and have not on all counts met their professional 
fiduciary duties.
  The bill at hand provides for resources to register, oversee and, 
yes,

[[Page H5086]]

even unregister, decommission, provide for someone losing their license 
should they be found not meeting appropriate financial and fiduciary 
standards. For that reason alone the bill should be adopted.
  But let me give one more example of past practice which I found 
troublesome. In the past, a rating agency could select a corporation on 
which it could engage in its credit analysis and issue an unsolicited 
credit rating. Unsolicited means the company didn't ask for it, but in 
some cases the rating agency would forward a bill to the corporation. 
Now why would the corporation pay that bill? Well, if a corporation, a 
public operating company, is going to issue public debt, they have to 
have the rating of at least two independent credit rating agencies.

                              {time}  1400

  Since two of the credit rating agencies perform about 99 percent of 
the ratings, it would become pretty evident that you would pay the bill 
because some time in the future your corporation would need to enter 
the public debt markets.
  This bill will provide the authority for the SEC to prohibit such 
activity in the future, I think a highly appropriate reform. Certainly, 
there could be other matters brought to the attention of the House on 
the subject of value, but the underlying essential reforms contained in 
this bill should be adopted and adopted today.

           Statement of Administration Policy, July 12, 2006


       h.r. 2990--Credit Rating Agency Duopoly Relief Act of 2006

       The Administration supports House passage of H.R. 2990, the 
     Credit Rating Agency Duopoly Relief Act of 2006. This 
     legislation would enable more credit rating agencies to 
     qualify nationally under Securities and Exchange Commission 
     (SEC) regulations. In addition, the bill requires credit 
     rating agencies to disclose their performance records, 
     methodologies, and any conflicts of interest. This bill would 
     improve competition and transparency in the credit rating 
     industry, which ultimately would benefit individual 
     investors. The Administration looks forward to working with 
     Congress to accomplish these goals.

  Mr. KANJORSKI. Mr. Chairman, I think there are good intentions on 
both sides of this issue, and unfortunately, I find it to be an 
extremely complicated issue and, most of all, not a sexy issue, as you 
can see by attendance on the floor.
  I doubt whether 5 percent of our viewing audience out there 
understands what a nationally recognized statistical rating 
organization really is, and probably not a great deal more really care 
about it. Except, when you look at what they do and the effect they 
have on all of our lives in some very big ways, they are an important 
entity and we have to get this right.
  And I want to point out that when this entity was constructed by 
rule, as Mr. Fitzpatrick pointed out, in 1975, there were originally 
three agencies that were granted this nationally recognized statistical 
rating organization nomenclature. Since that time, six have been added, 
for a total of nine.
  Existing today, there are only five because there has been 
consolidation in the industry. But what that indicates is that this has 
not been a prohibitive area for qualified organizations to gain the 
recognition of a nationally recognized statistical rating organization.
  I think, and I agree with our friends on the other side, that 
competition would be good, and the availability to enter this field 
would be much better if we can find a methodology to do that. It does 
not necessitate, however, a regimentation regime, and it certainly 
doesn't justify the thinking process that the marketplace, through 
competition, will cure all ends, and particularly if you look at the 
cost of competition and what it means.
  Certainly, when we are dealing with hundreds and billions and 
trillions of dollars in instruments to be evaluated by these 
organizations, whatever the cost of getting that down is infinitesimal 
to the importance of getting the quality of the organization correct 
and the rating correct to protect investors.
  I think that what we have a tendency to do is to think competition in 
and of itself is such a wonderful thing that it is going to solve all 
purposes. Well, I could suggest to my colleagues on the other side that 
if brain surgery is expensive we could entertain the idea that any 
doctor can register after 3 years of practice to be a brain surgeon, 
and that would qualify him to be a brain surgeon. And in many 
instances, in many places it clearly may, although I don't want him 
operating on my brain, and I assure you most of the Members of this 
House wouldn't want that process used to qualify one's self as a brain 
surgeon.
  This organizational structure and the methodology used in the rating 
agency are analogous to the complications of brain surgery in the 
financial field. There aren't many organizations that have the capacity 
to do it. Those that do should have methodologies of being tested as to 
quality, transparency and methodology, and they should have increased 
competition. That we agree upon.
  What we disagree upon is the nature of this bill and the regime of 
registration is not sufficient to guarantee quality. What may very 
easily happen is one or two rogue organizations, after 3 years, may 
apply, be designated as a nationally recognized statistical rating 
organization, and then do what Mr. Baker referred to, actually bid down 
the value by getting business and offering to give good ratings to get 
business. They may actually deteriorate the value and the quality of 
the ratings. We don't know that for certain. We don't want to suggest 
that. We want to make sure that we structure a methodology and means of 
designating nationally recognized statistical rating organizations so 
we don't have deterioration in quality just to get quantity. What we 
wish to have is quantity and quality, and both are equally important.
  I urge my colleagues in the House to consider that when they vote on 
this measure. I am offering a substitute which we will debate for 20 
minutes immediately after the close of this debate.
  I think that this is premature. At the very least, the committee and 
the Congress should have received legitimate critiques from the 
Securities Exchange Commission with all the expertise that they have. I 
am sure most of us don't feel fully qualified to view the structure of 
these organizations and their ability to perform on the basis of what 
we know individually. We are relying on expertise evaluation that is 
contained in very limited areas, one of which is certainly an 
independent agency of the United States Government, the Securities and 
Exchange Commission.
  I would urge, at this time, a ``no'' vote on passage of this when we 
get to that point in the bill.
  Mr. Chairman, I yield back the balance of my time.
  Mr. OXLEY. Mr. Chairman, in closing, let me first of all recognize 
the gentleman from Pennsylvania, Mr. Fitzpatrick. He has been a real 
bulldog on this issue. The committee has worked its will passing this 
bill on a voice vote in the committee. His leadership has been 
extraordinary. The committee has had numerous hearings. We have had 
input from all of the usual sources, and then some, to craft this 
legislation.
  If somebody were to tell you or anybody in this body that there was 
an industry out there where 80 percent of that business was controlled 
by two companies, whether it was in the steel industry or the auto 
industry, the health care field, I would suggest that particularly my 
friends on the other side of the aisle would be particularly upset and 
call it restraint of trade and ask for all kinds of investigations and 
to try to induce more competition and new entries into that 
marketplace. And that is exactly what we have got here. We have got 
credit rating agencies that for the last 35 years have basically had a 
duopoly on this very lucrative business. And as in the case with any 
other kind of business, when you have a duopoly or an oligopoly, you 
have lack of competition. You have a situation where you have conflicts 
of interest almost guaranteed, and you have a lack of transparency at 
the same time. That is what we attack in the Fitzpatrick legislation.
  Now, I have been chairman of this committee for 6 years. Even before 
I was chairman of this committee this was an issue. The SEC would 
always come up before the committee, testify, well, we are working on 
it. We are trying to open this up. And yet, a frustrated member of the 
committee said, when are you ever going to get around to it?

[[Page H5087]]

  This legislation is a wakeup call to the SEC, to the industry that, 
at least from our perspective, we are tired of waiting for this to 
happen. Everybody likes competition, but nobody likes competitors. 
Everybody wants to go to heaven, but nobody wants to die.
  It is time that we provide the kind of competitive structure in this 
critical area that is long due coming.
  There is a reason why, Mr. Chairman, in the Sarbanes-Oxley Act that 
we requested this study, because we knew that part of the problem going 
forward with Enron and WorldCom and the like was lack of competition 
and the abysmal ratings effect that two members of the duopoly created 
right before Enron and WorldCom collapsed. Just think about the credit 
rating that they gave to Enron and WorldCom just weeks before they 
collapsed, and it tells you a lot about the lack of competition, the 
lack of transparency and a potential conflict of interest in the 
existing status quo.
  This bill is anti-status quo. It is far reaching. It is visionary, 
and Mike Fitzpatrick's leadership on this cannot be overestimated. And 
so I think that every Member should take a look at this. This is part 
of the ongoing process to make our markets more competitive, more 
transparent, and this bill is a natural follow-up on what this Congress 
and what this committee has done over the years to create better 
confidence in the markets by investors to provide more competition 
therein. This legislation gets the job done, and all Members should 
support it.
  Mr. Chairman, I yield back the balance of my time.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the rule, the amendment in the nature of a substitute 
printed in the bill shall be considered as an original bill for the 
purpose of amendment under the 5-minute rule and shall be considered 
read.
  The text of the amendment in the nature of a substitute is as 
follows:

                               H.R. 2990

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

     SECTION 1. SHORT TITLE; REFERENCES.

       (a) Short Title.--This Act may be cited as the ``Credit 
     Rating Agency Duopoly Relief Act of 2006''.
       (b) References.--Except as otherwise expressly provided, 
     whenever in this Act an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Securities Exchange Act of 
     1934 (15 U.S.C. 78a et seq.).

     SEC. 2. FINDINGS.

       Upon the basis of facts disclosed by the record and report 
     of the Securities and Exchange Commission made pursuant to 
     section 702 of the Sarbanes-Oxley Act of 2002 (116 Stat. 
     797), hearings before the House Committee on Financial 
     Services during the 108th and 109th Congresses, comment 
     letters to the concept releases and proposed rules of the 
     Securities and Exchange Commission, and facts otherwise 
     disclosed and ascertained, the Congress finds that--
       (1) credit rating agencies are of national concern, in 
     that, among other things--
       (A) their ratings, publications, writings, analyses, and 
     reports are furnished and distributed, and their contracts, 
     subscription agreements, and other arrangements with clients 
     are negotiated and performed, by the use of the mails and 
     means and instrumentalities of interstate commerce;
       (B) their ratings, publications, writings, analyses, and 
     reports customarily relate to the purchase and sale of 
     securities traded on securities exchanges and in interstate 
     over-the-counter markets, securities issued by companies 
     engaged in business in interstate commerce, and securities 
     issued by national banks and member banks of the Federal 
     Reserve System;
       (C) the foregoing transactions occur in such volume as 
     substantially to affect interstate commerce, and securities 
     markets, the national banking system, and the national 
     economy; and
       (D) their regulation serves the compelling interest of 
     investor protection; and
       (2) the Securities and Exchange Commission--
       (A) has, through its designation of certain credit rating 
     agencies as nationally recognized statistical rating 
     organizations, created an artificial barrier to entry for new 
     participants; and
       (B) will, in its latest proposed rule defining nationally 
     recognized statistical rating organizations, codify and 
     strengthen this barrier.

     SEC. 3. DEFINITIONS.

       Section 3(a) (15 U.S.C. 78c(a)) is amended by adding at the 
     end the following new paragraphs:
       ``(60) Credit rating.--The term `credit rating' means an 
     assessment of the creditworthiness of an obligor as an entity 
     or with respect to specific securities or money market 
     instruments.
       ``(61) Credit rating agency.--The term `credit rating 
     agency' means any person--
       ``(A) engaged in the business of issuing credit ratings on 
     the Internet or through another readily accessible means, for 
     free or for a reasonable fee;
       ``(B) employing either a quantitative or qualitative model, 
     or both, to determine credit ratings; and
       ``(C) receiving fees from either issuers, investors, or 
     other market participants, or a combination thereof.
       ``(62) Nationally recognized statistical rating 
     organization or nrsro.--The term `nationally recognized 
     statistical rating organization' means a credit rating agency 
     that--
       ``(A) has been in business for at least three consecutive 
     years; and
       ``(B) is registered under section 15E.
       ``(63) Person associated with a nationally recognized 
     statistical rating organization.--The term `person associated 
     with a nationally recognized statistical rating organization' 
     means any partner, officer, director, or branch manager of 
     such nationally recognized statistical rating organization 
     (or any person occupying a similar status or performing 
     similar functions), any person directly or indirectly 
     controlling, controlled by, or under common control with such 
     nationally recognized statistical rating organization, or any 
     employee of such nationally recognized statistical rating 
     organization.''.

     SEC. 4. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL 
                   RATING ORGANIZATIONS.

       (a) Amendment.--The Securities Exchange Act of 1934 is 
     amended by inserting after section 15D (15 U.S.C. 78o-6) the 
     following new section:

     ``SEC. 15E. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL 
                   RATING ORGANIZATIONS.

       ``(a) Registration Procedures.--
       ``(1) Filing of application form.--A credit rating agency 
     that elects to be treated as a nationally recognized 
     statistical rating organization for the purposes of Federal 
     statutes, rules, and regulations may be registered by filing 
     with the Commission an application for registration in such 
     form and containing such of the following and any other 
     information and documents concerning such organization and 
     any persons associated with such organization as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in the public interest or for the protection of 
     investors:
       ``(A) any conflicts of interest relating to the issuance of 
     credit ratings by a nationally recognized statistical rating 
     organization;
       ``(B) the procedures and methodologies such nationally 
     recognized statistical rating organization uses in 
     determining credit ratings;
       ``(C) credit ratings performance measurement statistics 
     over short-term, mid-term, and long-term periods of such 
     nationally recognized statistical rating organization;
       ``(D) policies or procedures adopted and implemented by 
     such nationally recognized statistical rating organization to 
     prevent the misuse in violation of this title (or the rules 
     and regulations thereunder) of material, non-public 
     information; and
       ``(E) the organizational structure of such nationally 
     recognized statistical rating organization.
       ``(2) Review of application.--
       ``(A) Initial determination.--Within 90 days of the date of 
     the filing of such application (or within such longer period 
     as to which the applicant consents) the Commission shall--
       ``(i) by order grant such registration; or
       ``(ii) institute proceedings to determine whether 
     registration should be denied.
       ``(B) Conduct of proceedings.--Such proceedings shall 
     include notice of the grounds for denial under consideration 
     and opportunity for hearing and shall be concluded within 120 
     days of the date of the filing of the application for 
     registration. At the conclusion of such proceedings the 
     Commission, by order, shall grant or deny such registration. 
     The Commission may extend the time for conclusion of such 
     proceedings for up to 90 days if it finds good cause for such 
     extension and publishes its reasons for so finding or for 
     such longer period as to which the applicant consents.
       ``(C) Grounds for decision.--The Commission shall grant 
     such registration if the Commission finds that the 
     requirements of this section are satisfied. The Commission 
     shall deny such registration if it does not make such a 
     finding or if it finds that if the applicant were so 
     registered, its registration would be subject to suspension 
     or revocation under subsection (b).
       ``(3) Public availability of information.--Subject to 
     section 24, the Commission, by rule, shall require a 
     nationally recognized statistical rating organization, upon 
     the granting of registration under this section, to make the 
     information and documents filed with the Commission in its 
     application for registration, or in any amendment filed under 
     subsection (b)(1) or (2), publicly available on the website 
     or comparable readily accessible means of such nationally 
     recognized statistical rating organization.
       ``(b) Update of Registration.--
       ``(1) Update.--Each nationally recognized statistical 
     rating organization shall promptly amend its application for 
     registration under this section if any information or 
     documents provided therein become materially inaccurate, 
     except that a nationally recognized statistical rating 
     organization is not required to amend the information 
     required to be filed under subsection (a)(1)(C) by a filing 
     under this paragraph, but shall amend such information in 
     such organization's annual filing under paragraph (2) of this 
     subsection.
       ``(2) Certification.--Not later than 90 days after the end 
     of each calendar year, each nationally recognized statistical 
     rating organization shall file with the Commission an 
     amendment to its registration, in such form as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in the public interest or for the protection of 
     investors--

[[Page H5088]]

       ``(A) certifying that the information and documents in the 
     application for registration of such nationally recognized 
     statistical rating organization continue to be accurate; and
       ``(B) listing any material changes that occurred to such 
     information or documents during the previous calendar year.
       ``(c) Accountability for Ratings Procedures.--
       ``(1) Authority.--The Commission shall have the authority 
     under this Act to take action against any nationally 
     recognized statistical rating organization if such nationally 
     recognized statistical rating organization issues credit 
     ratings in contravention of those procedures, criteria, and 
     methodologies that such nationally recognized statistical 
     rating organization--
       ``(A) includes in its application for registration under 
     this section; or
       ``(B) makes and disseminates in reports pursuant to section 
     17(a) or the rules and regulations thereunder.
       ``(2) Limitation.--The rules and regulations applicable to 
     nationally recognized statistical rating organizations the 
     Commission may prescribe pursuant to this Act shall be 
     narrowly tailored to meet the requirements of this Act 
     applicable to nationally recognized statistical rating 
     organizations and shall not purport to regulate the substance 
     of credit ratings or the procedures and methodologies by 
     which such nationally recognized statistical rating 
     organizations determine credit ratings.
       ``(d) Censure, Denial, or Suspension of Registration; 
     Notice and Hearing.--The Commission, by order, shall censure, 
     place limitations on the activities, functions, or operations 
     of, suspend for a period not exceeding 12 months, or revoke 
     the registration of any nationally recognized statistical 
     rating organization if the Commission finds, on the record 
     after notice and opportunity for hearing, that such censure, 
     placing of limitations, suspension, or revocation is in the 
     public interest and that such nationally recognized 
     statistical rating organization, or any person associated 
     with such nationally recognized statistical rating 
     organization, whether prior to or subsequent to becoming so 
     associated--
       ``(1) has committed or omitted any act, or is subject to an 
     order or finding, enumerated in subparagraph (A), (D), (E), 
     (H), or (G) of paragraph (4) of section 15(b), has been 
     convicted of any offense specified in subparagraph (B) of 
     such paragraph (4) within 10 years of the commencement of the 
     proceedings under this subsection, or is enjoined from any 
     action, conduct, or practice specified in subparagraph (C) of 
     such paragraph (4);
       ``(2) has been convicted during the 10-year period 
     preceding the date of filing of any application for 
     registration, or at any time thereafter, of--
       ``(A) any crime that is punishable by imprisonment for 1 or 
     more years, and that is not described in section 15(b)(4)(B); 
     or
       ``(B) a substantially equivalent crime by a foreign court 
     of competent jurisdiction; or
       ``(3) is subject to any order of the Commission barring or 
     suspending the right of the person to be associated with a 
     nationally recognized statistical rating organization.
       ``(e) Withdrawal From Registration.--A nationally 
     recognized statistical rating organization registered under 
     this section may, upon such terms and conditions as the 
     Commission may establish as necessary in the public interest 
     or for the protection of investors, withdraw from 
     registration by filing a written notice of withdrawal with 
     the Commission. If the Commission finds that any nationally 
     recognized statistical rating organization is no longer in 
     existence or has ceased to do business as a credit rating 
     agency, the Commission, by order, shall cancel the 
     registration of such nationally recognized statistical rating 
     organization.
       ``(f) Representations.--
       ``(1) Representations of sponsorship by united states or 
     agency thereof.--It shall be unlawful for any nationally 
     recognized statistical rating organization registered under 
     this section to represent or imply in any manner whatsoever 
     that such nationally recognized statistical rating 
     organization has been designated, sponsored, recommended, or 
     approved, or that such nationally recognized statistical 
     rating organization's abilities or qualifications have in any 
     respect been passed upon, by the United States or any agency, 
     any officer, or any employee thereof.
       ``(2) Representation as nrsro of unregistered credit rating 
     agencies.--It shall be unlawful for any credit rating agency 
     to represent or imply in any manner whatsoever that such 
     credit rating agency has been designated, sponsored, 
     recommended, or approved, or that such credit rating agency's 
     abilities or qualifications have in any respect been passed 
     upon, by the United States or any agency, any officer, or any 
     employee thereof. It shall be unlawful for any credit rating 
     agency that is not registered under this section as a 
     nationally recognized statistical rating organization to 
     state that such credit rating agency is a nationally 
     recognized statistical rating organization under this Act.
       ``(3) Statement of registration under securities exchange 
     act of 1934 provisions.--No provision of paragraph (1) shall 
     be construed to prohibit a statement that a nationally 
     recognized statistical rating organization is a nationally 
     recognized statistical rating organization under this Act, if 
     such statement is true in fact and if the effect of such 
     registration is not misrepresented.
       ``(g) Prevention of Misuse of Nonpublic Information.--Each 
     nationally recognized statistical rating organization shall 
     establish, maintain, and enforce written policies and 
     procedures reasonably designed, taking into consideration the 
     nature of such nationally recognized statistical rating 
     organization's business, to prevent the misuse in violation 
     of this title, or the rules or regulations thereunder, of 
     material, nonpublic information by such nationally recognized 
     statistical rating organization or any person associated with 
     such nationally recognized statistical rating organization. 
     The Commission, as it deems necessary or appropriate in the 
     public interest or for the protection of investors, shall 
     adopt rules or regulations to require specific policies or 
     procedures reasonably designed to prevent misuse in violation 
     of this title (or the rules or regulations thereunder) of 
     material, nonpublic information.
       ``(h) Management of Conflicts of Interest.--Each nationally 
     recognized statistical rating organization shall establish, 
     maintain, and enforce written policies and procedures 
     reasonably designed, taking into consideration the nature of 
     the business of such nationally recognized statistical rating 
     organization and affiliated persons and affiliated companies 
     of such nationally recognized statistical rating 
     organization, to address and manage the conflicts of interest 
     that can arise from such business. The Commission, as it 
     deems necessary or appropriate in the public interest or for 
     the protection of investors, shall adopt rules or regulations 
     to prohibit, or require the management or disclosure of, any 
     conflicts of interest relating to the issuance of credit 
     ratings by a nationally recognized statistical rating 
     organization including, without limitation, conflicts of 
     interest relating to--
       ``(1) the manner in which a nationally recognized 
     statistical rating organization is compensated by the 
     obligor, or any affiliate of the obligor, for issuing credit 
     ratings or providing related services;
       ``(2) the provision of consulting, advisory, or other 
     services by a nationally recognized statistical rating 
     organization, or any person associated with such nationally 
     recognized statistical rating organization, to the obligor, 
     or any affiliate of the obligor;
       ``(3) business relationships, ownership interests, or any 
     other financial or personal interests between a nationally 
     recognized statistical rating organization, or any person 
     associated with such nationally recognized statistical rating 
     organization, and the obligor, or any affiliate of the 
     obligor; and
       ``(4) any affiliation of a nationally recognized 
     statistical rating organization, or any person associated 
     with such nationally recognized statistical rating 
     organization, with any person that underwrites the securities 
     or money market instruments that are the subject of a credit 
     rating.
       ``(i) Prohibited Conduct.--
       ``(1) Prohibited acts and practices.--The Commission may 
     adopt rules or regulations to prohibit any act or practice 
     relating to the issuance of credit ratings by a nationally 
     recognized statistical rating organization that the 
     Commission determines to be unfair, coercive, or abusive, 
     including any act or practice relating to--
       ``(A) seeking payment for a credit rating that has not been 
     specifically requested by the obligor--
       ``(i) from an obligor; or
       ``(ii) from an affiliate of an obligor, unless--

       ``(I) the organization is organized under subsection 
     (a)(1)(E) to receive fees from investors or other market 
     participants, or a combination thereof; and
       ``(II) the affiliate is such an investor or participant;

       ``(B) conditioning or threatening to condition the issuance 
     of a credit rating on the obligor's, or an affiliate of the 
     obligor's, purchase of other services or products, including 
     pre-credit rating assessment products, of the nationally 
     recognized statistical rating organization or any person 
     associated with such nationally recognized statistical rating 
     organization;
       ``(C) lowering or threatening to lower a credit rating on, 
     or refusing to rate, securities or money market instruments 
     issued by an asset pool unless a portion of the assets within 
     such pool also is rated by the nationally recognized 
     statistical rating organization;
       ``(D) modifying or threatening to modify a credit rating or 
     otherwise departing from its adopted systematic procedures 
     and methodologies in determining credit ratings, based on 
     whether the obligor, or an affiliate of the obligor, pays or 
     will pay for the credit rating or any other services or 
     products of the nationally recognized statistical rating 
     organization or any person associated with such nationally 
     recognized statistical rating organization.
       ``(2) Rule of construction.--Nothing in paragraph (1), or 
     in any rules or regulations adopted thereunder, shall be 
     construed to modify, impair, or supersede the operation of 
     any of the antitrust laws. For the purposes of the preceding 
     sentence, the term `antitrust laws' has the meaning given it 
     in the first section of the Clayton Act (15 U.S.C. 12), 
     except that such term includes section 5 of the Federal Trade 
     Commission Act (15 U.S.C. 45) to the extent such section 5 
     applies to unfair methods of competition.
       ``(j) Designation of Compliance Officer.--Each nationally 
     recognized statistical rating organization shall designate an 
     individual responsible for administering the policies and 
     procedures that are required to be established pursuant to 
     subsections (g) and (h), and for ensuring compliance with the 
     securities laws and the rules and regulations thereunder, 
     including those promulgated by the Commission pursuant to 
     this section.
       ``(k) Statements of Financial Condition.--Each nationally 
     recognized statistical rating organization shall, on a 
     confidential basis, file with the Commission, at intervals 
     determined by the Commission, such financial statements, 
     certified (if required by the rules or regulations of the 
     Commission) by an independent public accountant, and 
     information concerning its financial condition as the 
     Commission, by rule, may prescribe as necessary or 
     appropriate in the public interest or for the protection of 
     investors.

[[Page H5089]]

       ``(l) Elimination of Commission Designation Process for 
     NRSRO's.--
       ``(1) Cessation of designation.--Within 30 days after the 
     enactment of the Credit Rating Agency Duopoly Relief Act of 
     2006, the Commission shall cease to designate persons and 
     companies as nationally recognized statistical rating 
     organizations, as that term is used under rule 15c3-1 of the 
     Commission's rules (17 CFR 240.15c3-1).
       ``(2) Prohibition on reliance on no-action relief.--The no-
     action relief that the Commission has granted with respect to 
     the designation of nationally recognized statistical rating 
     organizations, as that term is used under rule 15c3-1 of the 
     Commission's rules (17 CFR 240.15c3-1), shall be void and of 
     no force or effect.
       ``(3) Notice to other agencies.--Within 30 days after the 
     date of enactment of the Credit Rating Agency Duopoly Relief 
     Act of 2006, the Commission shall give notice to the Federal 
     agencies which employ the term `nationally recognized 
     statistical rating organization' (as that term is used under 
     rule 15c3-1 of the Commission's rules (17 CFR 240.15c3-1)) in 
     their rules and regulations regarding the actions undertaken 
     pursuant to this section.
       ``(4) Review of existing regulations.--Within 180 days 
     after the date of enactment of the Credit Rating Agency 
     Duopoly Relief Act of 2006, the Commission shall review its 
     existing rules and regulations which employ the term 
     `nationally recognized statistical rating organization' or 
     `NRSRO' and promulgate new or revised rules and regulations 
     as the Commission may prescribe as necessary or appropriate 
     in the public interest or for the protection of investors.''.
       (b) Conforming Amendments to the 1934 Act.--
       (1) Section 15(b)(4)(B)(ii) (15 U.S.C. 78o(b)(4)(B)(ii)) is 
     amended by inserting ``nationally recognized statistical 
     rating organization,'' after ``transfer agent,''.
       (2) Section 15(b)(4)(C) (15 U.S.C. 78o(b)(4)(C)) is amended 
     by inserting ``nationally recognized statistical rating 
     organization,'' after ``transfer agent,''.
       (3) Section 21B(a) (15 U.S.C. 78u-2(a)) is amended by 
     inserting ``15E,'' after ``15C,''.
       (c) Other Conforming Amendments.--
       (1) Section 2(a) of the Investment Company Act of 1940 (15 
     U.S.C. 80a-2(a)) is amended by adding at the end the 
     following new paragraph:
       ``(53) The term `credit rating agency' has the same meaning 
     as given in section 3 of the Securities Exchange Act of 
     1934.''.
       (2) Section 9(a)(1) of the Investment Company Act of 1940 
     (15 U.S.C. 80a-9(a)) is amended by inserting ``credit rating 
     agency,'' after ``transfer agent,''.
       (3) Section 9(a)(2) of the Investment Company Act of 1940 
     (15 U.S.C. 80a-9(a)) is amended by inserting ``credit rating 
     agency,'' after ``transfer agent,''.
       (4) Section 202(a) of the Investment Advisers Act of 1940 
     (15 U.S.C. 80b-2(a)) is amended by adding at the end the 
     following new paragraph:
       ``(28) The term `credit rating agency' has the same meaning 
     as given in section 3 of the Securities Exchange Act of 
     1934.''.
       (5) Section 203(e)(2)(B) of the Investment Advisers Act of 
     1940 (15 U.S.C. 80b-3(e)) is amended by inserting ``credit 
     rating agency,'' after ``transfer agent,''.
       (6) Section 203(e)(4) of the Investment Advisers Act of 
     1940 (15 U.S.C. 80b-3(e)) is amended by inserting ``credit 
     rating agency,'' after ``transfer agent,''.
       (7) Section 1319 of the Housing and Community Development 
     Act of 1992 (12 U.S.C. 4519) is amended by striking 
     ``effectively'' and all that follows through ``broker-
     dealers'' and inserting ``that is a nationally recognized 
     statistical rating organization, as such term is defined in 
     section 3(a) of the Securities Exchange Act of 1934''.
       (8) Section 439 of the Higher Education Act of 1965 (20 
     U.S.C. 1087-2) is amended in subsection (r)(15)(A) by 
     striking ``means any entity recognized as such by the 
     Securities and Exchange Commission'' and inserting ``means 
     any nationally recognized statistical rating organization as 
     that term is defined under the Securities Exchange Act of 
     1934''.
       (9) Section 601(10) of title 23, United States Code, is 
     amended by striking ``identified by the Securities and 
     Exchange Commission as a Nationally Recognized Statistical 
     Rating Organization'' and inserting ``registered with the 
     Securities and Exchange Commission as a nationally recognized 
     statistical rating organization as that term is defined under 
     the Securities Exchange Act of 1934 (15 U.S.C. 78 et seq.)''.

     SEC. 5. ANNUAL AND OTHER REPORTS.

       Section 17(a)(1) (15 U.S.C. 78q(a)(1)) is amended by 
     inserting ``nationally recognized statistical rating 
     organization,'' after ``registered transfer agent,''.

     SEC. 6. GAO STUDY AND REPORT REGARDING CONSOLIDATION OF 
                   CREDIT RATING AGENCIES.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study--
       (1) to identify--
       (A) the factors that have led to the consolidation of 
     credit rating agencies;
       (B) the present and future impact of the condition 
     described in subparagraph (A) on the securities markets, both 
     domestic and international; and
       (C) solutions to any problems identified under subparagraph 
     (B), including ways to increase competition and the number of 
     firms capable of providing credit rating services to large 
     national and multinational business organizations that are 
     subject to the securities laws;
       (2) of the problems, if any, faced by business 
     organizations that have resulted from limited competition 
     among credit rating agencies, including--
       (A) higher costs;
       (B) lower quality of services;
       (C) anti-competitive practices;
       (D) impairment of independence; and
       (E) lack of choice; and
       (3) whether and to what extent Federal or State regulations 
     impede competition among credit rating agencies.
       (b) Consultation.--In planning and conducting the study 
     under this section, the Comptroller General shall consult 
     with--
       (1) the Securities and Exchange Commission;
       (2) the Department of Justice; and
       (3) any other public or private sector organization that 
     the Comptroller General considers appropriate.
       (c) Report Required.--Not later than 180 days after the 
     date of enactment of this Act, the Comptroller General shall 
     submit a report on the results of the study required by this 
     section to the Committee on Banking, Housing, and Urban 
     Affairs of the Senate and the Committee on Financial Services 
     of the House of Representatives.

     SEC. 7. EFFECTIVE DATE.

       The amendments made by sections 4 and 5 shall take effect 
     on January 1, 2008, except as otherwise provided in 
     paragraphs (1), (3), and (4) of subsection (l) of section 15E 
     of the Securities Exchange Act of 1934 (as added by such 
     amendments), and except that the Securities and Exchange 
     Commission is authorized to prescribe rules and regulations 
     to carry out such amendments beginning on the date of 
     enactment of this Act.

  The CHAIRMAN. No amendment to the committee amendment is in order 
except those printed in House Report 109-550. Each amendment may be 
offered only in the order printed in the report, by a Member designated 
in the report, shall be considered read, shall be debatable for the 
time specified in the report, equally divided and controlled by the 
proponent and an opponent, shall not be subject to amendment, and shall 
not be subject to a demand for division of the question.


                  Amendment No. 1 Offered by Mr. Oxley

  The CHAIRMAN. It is now in order to consider amendment No. 1 printed 
in House Report 109-550.
  Mr. OXLEY. Mr. Chairman, I offer an amendment.
  The CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 1 offered by Mr. Oxley:
       Page 3, line 20, insert ``staff'' after ``its''.
       Page 4, line 1, strike ``will'' and insert ``would''.
       Page 4, line 16, insert ``but does not include a commercial 
     credit reporting company'' after ``fee''.
       Page 5, line 3, strike ``for at least three'' and insert 
     ``as a credit rating agency for at least the past 3''.
       Page 6, line 1, strike ``filing'' and insert 
     ``furnishing''.
       Page 6, line 5, strike ``filing with'' and insert 
     ``furnishing to''.
       Page 6, line 21, insert ``(as applicable)'' after 
     ``periods''.
       Page 7, line 9, strike ``filing'' and insert 
     ``furnishing''.
       Page 7, line 20, strike ``filing'' and insert 
     ``furnishing''.
       Page 8, line 11, strike ``subsection (b)'' and insert 
     ``subsection (d)''.
       Page 8, line 17, strike ``filed with'' and insert 
     ``furnished to''.
       Page 8, line 18, strike ``filed'' and insert ``furnished''.
       Page 8, line 19, strike ``the website or'' and insert ``its 
     website or through another''.
       Page 8, beginning on line 20, strike ``of such nationally 
     recognized statistical rating organization''.
       Page 9, line 4, strike ``filed'' and insert ``furnished''.
       Page 9, line 5, strike ``a filing'' and insert ``an 
     amendment furnished''.
       Page 9, line 7, strike ``filing'' and insert ``amendment 
     furnished''.
       Page 9, beginning on line 11, strike ``file with'' and 
     insert ``furnish to''.
       Page 11, line 20, strike ``filing of'' and insert 
     ``furnishing''.
       Page 12, line 12, strike ``filing a written notice of 
     withdrawal with'' and insert ``furnishing a written notice of 
     withdrawal to''.
       Page 18, line 23, strike ``file with'' and insert ``furnish 
     to''.
       Page 19, line 5, insert ``Staff's'' after ``Commission''.
       Page 19, line 9, insert ``staff'' after ``Commission''.
       Page 19, line 15, insert ``staff'' after ``Commission''.
       Page 20, line 6, strike ``180 days'' and insert ``360 
     days''.
       Page 23, strike lines 3 through 6 and insert the following:

     SEC. 5. ANNUAL AND OTHER REPORTS.

       Section 17(a)(1) (15 U.S.C. 78q(a)(1)) is amended--
       (1) by inserting ``nationally recognized statistical rating 
     organization,'' after ``registered transfer agent,''; and
       (2) by adding at the end the following: ``Any report a 
     nationally recognized statistical rating organization may be 
     required by Commission rules under this paragraph to make and 
     disseminate to the Commission shall be deemed furnished to 
     the Commission.''

  The CHAIRMAN. Pursuant to House Resolution 906, the gentleman from

[[Page H5090]]

Ohio (Mr. Oxley) and a Member opposed each will control 5 minutes.
  The Chair recognizes the gentleman from Ohio.
  Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, I rise to offer an amendment to H.R. 2990, the Credit 
Rating Agency Duopoly Relief Act. This amendment makes certain 
clarifying and technical changes to Mr. Fitzpatrick's rating agency 
reform legislation.
  Specifically, the amendment clarifies that there is no private right 
of action for rating agencies registered as nationally recognized 
statistical rating organizations, or NRSROs, under the Securities 
Exchange Act of 1934. Neither is there an express or an implied private 
right of action with respect to rating agencies registered as NRSROs 
under the Securities Exchange Act. The Securities and Exchange 
Commission will retain its enforcement authority over registered rating 
agencies.
  In addition, the amendment allots to the Securities and Exchange 
Commission an additional 6 months, for a total of 1 year, to review 
and, if necessary, revise its regulations that use the term ``NRSRO.'' 
The additional time will allow the SEC and industry participants more 
time to properly assess regulations using the NRSRO technology.
  This amendment also makes a number of technical amendments, 
clarifying definitions, findings and disclosure requirements.
  I urge all Members to support this amendment.
  Mr. Chairman, I reserve the balance of my time.
  Mr. KANJORSKI. Mr. Chairman, I rise to claim the time in opposition.
  The Acting CHAIRMAN (Mr. Sweeney). The gentleman is recognized for 5 
minutes.
  Mr. KANJORSKI. Mr. Chairman, I rise in order to express some thoughts 
on the amendment, but I do not intend to oppose the manager's amendment 
itself.
  The manager's amendment, Mr. Chairman, makes a number of technical 
changes in the bill, improving its precision, fixing drafting errors 
and extending the implementation time frames. These changes are 
acceptable and appropriate.
  The manager's amendment also makes a set of larger and more 
significant changes; namely, it alters the bill's wording in multiple 
places in an attempt to address recently raised concerns about the 
possible creation of explicit and implicit private rights of action 
under the bill.
  Regardless of one's position on whether these changes are needed, and 
whether they accomplish their intended purposes, the fact is that these 
modifications are coming late in the legislative process and indicates 
that the legislation is not well thought out.

                              {time}  1415

  Moreover, this is precisely the type of issue on which getting the 
views of the experts at the Securities and Exchange Commission would 
have been helpful and invaluable.
  That said, Mr. Chairman, I do not intend to object to the manager's 
amendment.
  Mr. Chairman, I have no further requests for time, and I yield back 
the balance of my time.
  Mr. OXLEY. Mr. Chairman, I have no further requests for time, and I 
yield back the balance of my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Ohio (Mr. Oxley).
  The amendment was agreed to.


                Amendment No. 2 Offered by Mr. Kanjorski

  The Acting CHAIRMAN. It is now in order to consider amendment No. 2 
printed in House Report 109-550.
  Mr. KANJORSKI. Mr. Chairman, I offer a substitute amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 2 offered by Mr. Kanjorski:
       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This act may be cited as the ``Credit Ratings 
     Accountability and Transparency Act of 2006''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Credit rating agencies play an important role in the 
     United States capital markets by opining on the 
     creditworthiness of certain entities, securities, and money 
     market instruments.
       (2) Institutional and retail investors utilize ratings 
     issued by credit rating agencies in connection with 
     evaluating credit risk and making investment decisions.
       (3) The Securities and Exchange Commission staff, through 
     the no action letter process, has identified certain credit 
     rating agencies as Nationally Recognized Statistical Rating 
     Organizations or NRSROs.
       (4) Many Federal and State regulators and legislatures 
     require the use of NRSRO ratings in regulations and statutes, 
     including those concerning capital requirements for regulated 
     financial institutions and portfolio quality standards, to 
     ensure the utilization of high quality ratings.
       (5) The Commission staff's process for identifying NRSROs 
     should be more transparent and efficient, while maintaining a 
     high level of quality among NRSROs.
       (6) Increased competition among credit rating agencies 
     seeking to be identified as a NRSRO is desirable, so long as 
     it is consistent with efforts to ensure high quality ratings.

     SEC. 3. RULEMAKING ON NRSRO DEFINITION.

       (a) NRSRO Definition.--Within 60 days after the date of 
     enactment of this Act, the Commission shall finalize its 
     proposed rulemaking to define a NRSRO, published in the 
     Federal Register on April 25, 2005 (70 Fed. Reg. 21306 et 
     seq.).
       (b) Publication of Guidelines.--Within 180 days after the 
     date of enactment of the Act, the Commission shall publish 
     guidelines concerning the process by which Commission staff 
     issues no-action letters regarding NRSROs, including 
     guidelines concerning the staff's determinations in such no-
     action letters.

     SEC. 4. SENSE OF CONGRESS ON NRSRO VOLUNTARY FRAMEWORK.

       (a) Findings.--Congress finds the following:
       (1) The existing NRSROs in the United States have entered 
     into discussions to improve current oversight of their 
     activities via the adoption of a voluntary framework.
       (2) These discussions have sought to apply the self-
     regulatory model approved by the International Organization 
     of Securities Commissions (in this section referred to as 
     ``IOSCO'') of which the Commission is a participant.
       (3) The European Commission policy on credit rating 
     agencies set out in December 2005 used compliance with the 
     IOSCO code as a central component in ensuring the proper 
     functioning of rating agencies in the capital markets.
       (4) The Chairman of the Commission has testified before the 
     Financial Services Committee of the House of Representatives 
     that Commission staff are continuing to review drafts of a 
     voluntary framework developed by the NRSROs and offer advice 
     about its provisions and contents.
       (5) The adoption of a voluntary framework by NRSROs in the 
     United States based on the IOSCO self-regulatory model and 
     paralleling the regulatory regime adopted by the European 
     Commission would enhance market discipline, advance investor 
     protection, and facilitate the harmonization of international 
     standards in the area of credit ratings.
       (b) Sense of Congress.--In light of the findings set forth 
     in subsection (a), it is the sense of the Congress that--
       (1) all interested parties involved in establishing a 
     voluntary framework for self-regulation in the United States, 
     which is similar to the self-regulatory regime recently 
     adopted by the European Commission that is based upon the 
     IOSCO-approved code for overseeing credit rating agencies, 
     should complete discussions and implement a self-regulatory 
     model as soon as practicable;
       (2) such voluntary framework should be developed in 
     consultation with the Commission and include adoption of any 
     and all rules, regulations, policies, and practices deemed 
     necessary and appropriate for the protection of investors and 
     in the public interest, including the disclosure of written 
     policies and procedures of NRSROs in the United States 
     designed to--
       (A) address conflicts of interest relating to--
       (i) relationships between NRSROs and rated entities;
       (ii) relationships between NRSROs and underwriters; and
       (iii) fee structures of the NRSROs;
       (B) prevent the misuse of confidential information by a 
     NRSRO or any person associated with a NRSRO;
       (C) ensure compliance with all relevant Federal securities 
     laws;
       (D) ensure that each NRSRO is capable of issuing 
     independent, predictive, consistent, and reliable ratings; 
     and
       (E) provide performance data, including default rates for 
     its ratings, for the immediately preceding 4 years, or if in 
     existence less than 4 years, for the life of the entity.

     SEC. 5. ANNUAL TESTIMONY ON IMPROVING THE CREDIT RATING 
                   INDUSTRY.

       The Chairperson of the Commission, or a designee of the 
     Chairperson, shall annually provide oral testimony beginning 
     in 2007, and for 5 years thereafter, to the Committee on 
     Financial Services of the House of Representatives regarding 
     efforts to improve the transparency and accountability of the 
     credit rating industry, including--
       (1) the designation of NRSROs;
       (2) the status and the effectiveness of the voluntary 
     framework described in section 4;
       (3) the quality of ratings issued by NRSROs;

[[Page H5091]]

       (4) the state of competition among NRSROs; and
       (5) the appropriateness, need, and form of any potential 
     legislation in the area of credit ratings.

     SEC. 6. DEFINITIONS.

       As used in this Act--
       (1) the term ``Commission'' means the Securities and 
     Exchange Commission; and
       (2) the term ``NRSRO'' means a Nationally Recognized 
     Statistical Rating Organization as determined by the 
     Commission.

  The Acting CHAIRMAN. Pursuant to House Resolution 906, the gentleman 
from Pennsylvania (Mr. Kanjorski) and a Member opposed each will 
control 10 minutes.
  The Chair recognizes the gentleman from Pennsylvania.
  Mr. KANJORSKI. Mr. Chairman, I yield myself such time as I may 
consume.
  While the supporters of H.R. 2990 have tinkered with and somewhat 
improved the bill since its introduction, the central provision of the 
legislation, in the words of the Consumer Federation of America, is 
``fatally flawed.'' I am likewise very concerned that this bill 
sacrifices the quality of independent assessments of financial strength 
provided by the ``nationally recognized'' credit raters that help our 
capital markets remain vibrant.
  As a result, I am offering a substitute. Unlike H.R. 2990, which 
creates an untested system for establishing nationally recognized 
agencies, this alternative expedites and builds upon existing 
regulatory, private sector, and international reform efforts.
  The voluntary registration regime of H.R. 2990 will increase the 
number of nationally recognized agencies without assuring the 
credibility and reliability of the issued ratings. We must seek 
equilibrium, balancing the desire to increase the quantity of approved 
agencies with the need to ensure high-quality ratings. The substitute 
addresses this shortcoming.
  Moreover, H.R. 2990 ignores ongoing reform efforts. The Securities 
and Exchange Commission has a rulemaking pending on these matters. 
Currently, approved raters are also developing a voluntary, robust 
self-regulatory regime based on the industry code established by the 
International Organization of Securities Commissions. Moreover, the 
European Commission recently relied on this global code to oversee its 
approved rating agencies.
  Congress should build upon these domestic, private sector, and 
international reform efforts rather than creating chaos by forging a 
new regulatory plan. To ensure the advancement of good public policy in 
this area, we need to recognize the work of others. We also ought to 
provide for the continued legislative oversight of these matters and 
minimize unintended consequences.
  Specifically, the substitute would require the commission to complete 
its definitional rulemaking on what constitutes an approved rating 
agency within 60 days of enactment. It would also require the 
commission to establish public guidance about the process used to 
identify new, nationally recognized agencies within 180 days of 
enactment.
  The substitute would additionally encourage participating parties to 
expedite and complete their discussions over the voluntary framework to 
improve market discipline and enhance rating quality. Finally, it would 
require annual hearings before the Financial Services Committee to 
explore the need for further action.
  In short, the substitute establishes a globally consistent market-
based approach. It protects the quality of ratings, enhances 
competition, and injects transparency into the process for determining 
nationally recognized agencies. It also promotes international 
harmonization; ensures that Congress stays focused on these matters; 
and gives the commission, which has the foremost expertise on these 
issues, a seat at the table in developing any future bill.
  In Monday's Bond Buyer, the head of JPMorgan's rating advisory group 
opined that efforts related to the rulemaking to defined approved 
rating agencies and to establish a voluntary framework consistent with 
global standards offers a ``positive solution'' to present concerns. We 
should heed his advice to balance quality and quantity concerns in 
order to ensure that investors benefit from the best thinking and the 
best opinions by passing this substitute.
  In sum, Mr. Chairman, the substitute pursues a more prudent course 
that accelerates and adds to ongoing domestic, private sector, and 
international reform efforts instead of creating an untested system for 
establishing nationally recognized agencies. This alternative would 
also protect investors by ensuring high-quality ratings.
  It is the better approach, and I urge its adoption.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BAKER. Mr. Chairman, I rise to claim the time in opposition to 
the amendment.
  The Acting CHAIRMAN. The gentleman from Louisiana is recognized for 
10 minutes.
  Mr. BAKER. Mr. Chairman, I yield myself such time as I may consume.
  I want to make clear that there is a difference of opinion as to the 
appropriate method to move forward and establish that the committee's 
work product is not frivolously or expeditiously constructed. The 
committee has worked many long hours and heard from many experts in the 
field as to the most sound recommendations that could be adopted to 
effect the changes both sides agree need to be made. In studying the 
gentleman's substitute, I think it is important to recognize, however, 
the consequences if the House were to adopt this specific 
recommendation.
  The Kanjorski amendment would establish by sense of Congress that the 
SEC should continue to negotiate with the NRSROs to form some sort of 
unidentified self-regulatory model. What has been suggested in the 
proposal is that offered by the International Organization of 
Securities Commissions, the acronym IOSCO. The IOSCO code provides for 
a rating agency disclosure regime, but those who have studied it who do 
not share its goals point out there is the lack of a meaningful 
enforcement provision that is so essential, we believe, that is 
contained in H.R. 2990. It is important that if we do identify conduct 
that is inappropriate financial behavior, violating one's fiduciary 
obligation, that the regulatory structure have a mechanism to take away 
the right to practice. H.R. 2990 would provide that certainty.
  And, further, Mr. Kanjorski's amendment requires the SEC to testify 
annually for a period of 5 years on the SEC's efforts to improve the 
transparency of the credit rating agency. Therein, I think, generally 
not giving much attention on the question of reporting by an agency 
represents the real thrust of the amendment. It is to continue the 
dialogue for another 5 years.
  Well, we have identified the sufficient problems to bring to the 
Congress's concern. There is time for action. The time is now. And 
adoption of the Fitzpatrick recommendation, H.R. 2990, is essential and 
justified and, I think, essential and justified for us to act today.
  Mr. Chairman, I reserve the balance of my time.
  Mr. KANJORSKI. Mr. Chairman, I yield 4 minutes to the gentleman from 
North Dakota (Mr. Pomeroy).
  Mr. POMEROY. Mr. Chairman, I rise both as a Representative of North 
Dakota and also as a former State insurance regulator, a solvency 
regulator, to speak in favor of the substitute and against the 
underlying legislation.
  Let me talk about the underlying legislation first. This essentially 
``go to a laissez-faire, let the market determine rating agency 
credibility'' is a very different departure from the long-established 
course we have been on with national registered statistical rating 
agencies.
  Just a little textbook lesson here: Transparency is generally 
regarded as essential to the free function of financial markets. But 
transparency depends upon the ability of those participating in the 
markets to know the credit worthiness of the players. These statistical 
rating agencies make an assessment of the credit worthiness of the 
players and put the information out so the market can employ it.
  Now what they would do is move away from a guaranteed assessment of 
credibility by a national registry on these statistical rating 
agencies, and they would let you have this designation for an outfit 
that has been in existence 3 years, with no evaluation of the 
competence and the credibility underlying the assessments made by

[[Page H5092]]

these credit rating agencies. The result, of course, is predictable: 
widely different quality in the credit assessment brought forward by 
the rating agencies.
  This is very bad business. Very bad business for virtually all 
involved. For the investors: Well, you want to make an investment, but 
they say the Humpty Dumpty rating agency gives this a triple star, 
grade A rating. Well, you don't really know a lot about Humpty Dumpty 
rating agency, but it sounds pretty good. They are one of these 
statistical rating agencies because they have been around 3 years, and 
you make your investment accordingly.
  The competence of the Humpty Dumpty rating agency matters, which is 
why the present approach to the national registry matters. Deregulating 
it is bad for investors and people will lose money.
  Now, if it is bad for investors, you might say, well, that must 
really be a boon, then, to companies that want to fleece investors by 
raising capital on noncredit-worthy enterprises. Not necessarily. I 
think this is bad for companies too. And let me tell you about an 
experience I encountered as an insurance commissioner.
  We had standard rating agencies, and then there was a startup rating 
agency. It got a lot of press. Inevitably, they kept coming up with 
more alarming rating assessments of the insurance companies, and that 
got widely reported in the financial press because it was newsworthy. 
It was a bit of the ``sky is falling'' rating agency.
  And yet here is how that rating agency made money: If you wanted to 
call in and get their rating of an insurance company, you had to pay 
them money to get that information. They made money for every call into 
their office. So they put out a fancy press release on an insurance 
company or on insurance company ratings at large, drum up free media 
coverage, get people calling in, and by the calls, make a lot of money. 
In the process, I believe they were often very unfair in their ratings 
and giving a falsely ominous impression of the solvency status of the 
insurance companies.
  So this thing, while bad for investors, it may be bad for companies 
too because in this proliferation of unregulated rating agencies, you 
are going to have some rating agencies that just love to tell a 
terrible story, irrespective of whether it is fair or whether it is 
not.
  So really disconnecting from the Securities and Exchange Commission 
and to have the majority in the House run this deregulation of rating 
agencies, ultimately so critical to the function of our financial 
markets, is, frankly, just a little nutty, not well founded, not well 
thought out; and it is an idea that ought to be cured by the passage of 
the substitute, which basically brings it back in line with the quality 
assurance of nationally registered statistical rating agencies.
  I thank the gentleman for yielding.
  Mr. BAKER. Mr. Chairman, I yield 3 minutes at this time to the 
primary sponsor of the legislation, Mr. Fitzpatrick.
  Mr. FITZPATRICK of Pennsylvania. Mr. Chairman, as the bill's sponsor, 
I rise in opposition to the substitute amendment offered.
  It is vital that Congress bring competition, transparency, and 
accountability to the credit rating industry. And H.R. 2990 would 
accomplish just that. However, Congressman Kanjorski's substitute 
amendment retains the anticompetitive status quo and provides no 
transparency and no accountability.
  The subcommittee amendment offered today has three key components: It 
requires the SEC to complete its definitional rulemaking; it encourages 
completion of the voluntarily framework; and it calls for hearings on 
rating agencies before the Committee on Financial Services.

                              {time}  1430

  First, the SEC has never defined the term ``NRSRO,'' and it has been 
over 30 years. I doubt that the SEC's illustrious track record on this 
issue deserves this much faith. H.R. 2990 replaces this vague and 
undefined system with a registration system and is consistent with the 
free market principles of our Federal securities laws. The substitute 
amendment makes no change to this ambiguous and anticompetitive system.
  Second, a voluntary agreement offers no real accountability. The SEC 
cannot enforce violations of the voluntary agreement by rating agencies 
that sign it, let alone those agencies that are not signatories. H.R. 
2990 holds credit rating firms accountable and requires adherence to 
the credit rating firm's stated methodologies.
  Third, there already have been numerous hearings in the Financial 
Services Committee in the 108th and 109th Congresses. No less than 
five, dozens of witnesses have been called to testify before the 
committee, and close to 1,000 pages of recorded and transcribed 
testimony. The Financial Services Committee has been diligent in 
holding hearings on this important issue.
  Mr. Chairman, in the wake of a seminal failure by S&P and Moody's in 
the Enron and WorldCom scandals, we must ensure integrity in the credit 
ratings process. This bill would inject greater competition, 
transparency and accountability in the credit rating industry. As a 
result, prices and anticompetitive practices will be reduced, credit 
ratings quality will improve, and firms will innovate.
  Mr. Chairman, I strongly urge a ``no'' vote on the substitute 
amendment.
  Mr. KANJORSKI. Mr. Chairman, may I inquire as to how many speakers 
are on the other side.
  Mr. BAKER. Mr. Chairman, how much time is remaining?
  The Acting CHAIRMAN. The gentleman from Pennsylvania (Mr. Kanjorski) 
has 1\1/2\ minutes remaining. The gentleman from Louisiana (Mr. Baker) 
has 5\1/2\ minutes remaining.
  Mr. BAKER. Mr. Chairman, we will have two.
  Mr. KANJORSKI. Then I will reserve my time.
  Mr. BAKER. Mr. Chairman, I yield 3 minutes to the gentleman from 
North Carolina (Mr. McHenry), a valuable member of the Financial 
Services Committee.
  Mr. McHENRY. Mr. Chairman, I first want to begin by thanking my 
colleague from Pennsylvania for offering this substitute. I think it is 
important that on large issues coming before Congress that both sides 
are heard.
  We dealt with this issue in committee. This bill, sponsored by my 
colleague from Pennsylvania (Mr. Fitzpatrick) was voted out of 
committee by a voice vote, certainly not a very controversial piece of 
legislation. Mr. Kanjorski's amendment, offered in the nature of a 
substitute as well in the committee, which is substantially the same as 
he is offering here today, was voted down. So we have already dealt 
with this and wrestled with this issue in committee.
  I also want to talk about the substance of his amendment today. What 
it does is retain the status quo. In essence, the SEC has endorsed an 
anticompetitive model for credit rating agencies. There are two 
dominating credit rating agencies that control 80 percent of the 
marketplace, and this is because of SEC regulation.
  What Mr. Fitzpatrick's bill does is enable the private sector to come 
forward and actually increase the number of credit rating agencies in 
the marketplace so investors can decide. So it is a free market piece 
of legislation.
  What Mr. Kanjorski's bill does is retain the status quo that is 
anticompetitive, and beyond that, it has no accountability. It is a 
voluntary regime which Mr. Kanjorski endorses, without any real 
mechanism of enforcement, and beyond that, it codifies this chicken and 
egg problem within the credit rating agencies today.
  You have to be a nationally recognized credit rating rated agency in 
order to be a national recognized credit agency. Now here is the deal. 
You can operate all you want and call yourself a nationally recognized 
credit rating rated agency, but unless you are recognized by the SEC 
you cannot operate.
  So, therefore, you are codifying in law a very complicated procedure 
that the SEC has put in place. It says you cannot actually function in 
the marketplace without the SEC endorsing it, but in order to get the 
SEC to endorse you, you have to be in the marketplace and operating. 
So, in essence, we have a very complicated piece of procedure that the 
SEC's put in place that is anticompetitive.
  Beyond that, Mr. Speaker, in conclusion, I would say that what the 
gentleman from Pennsylvania is offering in the nature of a substitute 
is a question of who, not what. This is truly

[[Page H5093]]

about politics today. I think it is a question of who is sponsoring the 
legislation, who is moving the legislation, not what the underlying 
legislation does.
  I would ask my colleague to vote with us on final passage, to move 
forward past this substitute and let us do the business of the House 
and the business of the people and endorse a free market solution.
  Mr. KANJORSKI. Mr. Chairman, I think I have the right to close, so I 
will reserve my time.
  The Acting CHAIRMAN. The gentleman from Louisiana (Mr. Baker) has the 
right to close.
  Mr. KANJORSKI. Mr. Chairman, I yield myself the balance of the time.
  Mr. Chairman, I listened to the last speaker with somewhat dismay. He 
tended to quote a lot of votes. Yes, there was a vote that passed this 
on from the committee to the floor, and after the preceding vote that 
was held by the committee on the substitute he failed to inform the 
House that there were 35 against the substitute, 31 in favor of the 
substitute. This did not come out of the committee without contention. 
It came out on the voice vote because we saw the count was 35-31. We 
did not call for a vote.
  Secondly, the gentleman charges my suggestion of the substitute as a 
definition to define and maintain the status quo. Either he has not 
looked at the substitute or we define the status quo in different 
proportions because this substitute does several things.
  First and foremost, it would require the Securities and Exchange 
Commission to complete its definitional rulemaking of what constitutes 
an approved rating agency within 60 days of enactment. That does not 
give them unlimited time to continue to pursue. Within 60 days they 
have to have the definition.
  The second position, it would require the commission to establish 
public guidelines about the process used to identify new nationally 
recognized agencies within 180 days of enactment, within 6 months. That 
is hardly the status quo.
  Then, finally, we would encourage continuation and participation of 
the parties to expedite and complete a voluntary framework to improve 
the discipline and enhance rating quality.
  This substitute accomplishes several things, moves the process along 
but does not create an entire new entity and process which is 
contradictory to international agreements and other conditions held 
throughout the world.
  I urge the adoption of the substitute.
  Mr. BAKER. Mr. Chairman, I yield myself the remaining time.
  Mr. Chairman, it is appropriate, I think, to perhaps review the 
subject matter at hand from a little higher altitude than the debate 
has taken us.
  We have an obligation in this House to ensure that hardworking 
American families who invest their money in the markets can do so in 
the most safe and sound manner possible. What we now know about the 
function of the credit rating agencies over the past decade is their 
performance has been less than what we should expect. In fact, days 
before corporate failures, they continued to report the highest 
investment grade analysis on many troubled companies. We know that we 
must act to ensure that pension fund investors, managers of perhaps 
rather large public schoolteacher or public employee investment funds 
have the best tools available to ensure that innocent third parties are 
not harmed by abhorrent actors in the capital markets.
  I can assure my colleagues that this proposal moves us in an improved 
direction. Certainly, any legislation can be improved upon, but the 
bill we have before us is fully warranted, fully justified, and it is 
now timely for this House to act.
  I commend Chairman Oxley for his continued leadership in trying to 
bring out fiscal accountability in the capital markets. I commend Mr. 
Fitzpatrick for his hard work on this measure. But I ask this House to 
turn down the Kanjorski substitute and adopt H.R. 2990 as recommended 
by the Financial Services Committee.
  Mr. Chairman, I yield back my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Pennsylvania (Mr. Kanjorski).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.


                             Recorded Vote

  Mr. KANJORSKI. Mr. Chairman, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 198, 
noes 222, not voting 12, as follows:

                             [Roll No. 367]

                               AYES--198

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Barrow
     Bean
     Becerra
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boren
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Butterfield
     Capps
     Capuano
     Cardin
     Cardoza
     Carnahan
     Carson
     Case
     Chandler
     Clay
     Cleaver
     Clyburn
     Conyers
     Cooper
     Costa
     Costello
     Cramer
     Crowley
     Cuellar
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dicks
     Dingell
     Doggett
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Gonzalez
     Gordon
     Green, Al
     Green, Gene
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Herseth
     Higgins
     Hinchey
     Hinojosa
     Holden
     Holt
     Honda
     Hooley
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick (MI)
     Kind
     Kucinich
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren, Zoe
     Lowey
     Lynch
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy
     McCollum (MN)
     McDermott
     McGovern
     McIntyre
     McKinney
     Meehan
     Meek (FL)
     Meeks (NY)
     Melancon
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore (KS)
     Moore (WI)
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Salazar
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Schakowsky
     Schiff
     Schwartz (PA)
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Wasserman Schultz
     Waters
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--222

     Aderholt
     Akin
     Alexander
     Bachus
     Baker
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Biggert
     Bilbray
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boustany
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burton (IN)
     Buyer
     Calvert
     Camp (MI)
     Campbell (CA)
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Cole (OK)
     Conaway
     Crenshaw
     Cubin
     Davis (KY)
     Davis, Tom
     Deal (GA)
     Dent
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Drake
     Dreier
     Duncan
     Ehlers
     Emerson
     English (PA)
     Everett
     Feeney
     Ferguson
     Fitzpatrick (PA)
     Flake
     Foley
     Forbes
     Fortenberry
     Fossella
     Foxx
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gohmert
     Goode
     Goodlatte
     Granger
     Graves
     Green (WI)
     Gutknecht
     Hall
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Hulshof
     Hunter
     Hyde
     Inglis (SC)
     Issa
     Istook
     Jenkins
     Jindal
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     Kuhl (NY)
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas
     Lungren, Daniel E.
     Mack
     Manzullo
     Marchant
     McCaul (TX)
     McCotter
     McCrery
     McHenry
     McHugh
     McKeon
     McMorris
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Neugebauer
     Ney
     Norwood
     Nunes
     Nussle
     Osborne
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Petri
     Pickering
     Pitts
     Poe
     Pombo
     Porter
     Price (GA)
     Pryce (OH)
     Putnam
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reichert
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schmidt
     Schwarz (MI)
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus

[[Page H5094]]


     Shuster
     Simmons
     Simpson
     Smith (NJ)
     Smith (TX)
     Sodrel
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiberi
     Turner
     Upton
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Westmoreland
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--12

     Culberson
     Davis, Jo Ann
     Evans
     McNulty
     Northup
     Peterson (PA)
     Platts
     Ros-Lehtinen
     Sessions
     Slaughter
     Tiahrt
     Watson

                              {time}  1503

  Mr. CARTER and Mr. HEFLEY changed their vote from ``aye'' to ``no.''
  So the amendment was rejected.
  The result of the vote was announced as above recorded.
  The Acting CHAIRMAN. The question is on the committee amendment in 
the nature of a substitute, as amended.
  The committee amendment in the nature of a substitute, as amended, 
was agreed to.
  The Acting CHAIRMAN. Under the rule, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
McHugh) having assumed the chair, Mr. Sweeney, Acting Chairman of the 
Committee of the Whole House on the State of the Union, reported that 
the Committee, having had under consideration the bill (H.R. 2990) to 
improve ratings quality by fostering competition, transparency, and 
accountability in the credit rating agency industry, pursuant to House 
Resolution 906, he reported the bill back to the House with an 
amendment adopted by the Committee of the Whole.
  The SPEAKER pro tempore. Under the rule, the previous question is 
ordered.
  Is a separate vote demanded on the amendment to the committee 
amendment in the nature of a substitute adopted by the Committee of the 
Whole? If not, the question is on the committee amendment in the nature 
of a substitute.
  The committee amendment in the nature of a substitute was agreed to.
  The SPEAKER pro tempore. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded Vote

  Mr. OXLEY. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, this 15-
minute vote on passage of H.R. 2990 will be followed by a 5-minute vote 
on the motion to suspend the rules on H.R. 5646.
  The vote was taken by electronic device, and there were--ayes 255, 
noes 166, not voting 11, as follows:

                             [Roll No. 368]

                               AYES--255

     Aderholt
     Akin
     Alexander
     Allen
     Andrews
     Bachus
     Baker
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Bean
     Beauprez
     Biggert
     Bilbray
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boren
     Boustany
     Boyd
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burton (IN)
     Butterfield
     Buyer
     Calvert
     Camp (MI)
     Campbell (CA)
     Cannon
     Cantor
     Capito
     Cardoza
     Carter
     Case
     Castle
     Chabot
     Chocola
     Coble
     Cole (OK)
     Conaway
     Costa
     Cramer
     Crenshaw
     Cubin
     Cuellar
     Culberson
     Davis (KY)
     Davis, Tom
     Deal (GA)
     Dent
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dicks
     Doolittle
     Drake
     Dreier
     Duncan
     Edwards
     Ehlers
     Emerson
     English (PA)
     Everett
     Feeney
     Ferguson
     Fitzpatrick (PA)
     Flake
     Foley
     Forbes
     Ford
     Fortenberry
     Fossella
     Foxx
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gohmert
     Goode
     Goodlatte
     Gordon
     Granger
     Graves
     Green (WI)
     Green, Gene
     Gutknecht
     Hall
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hinojosa
     Hobson
     Hoekstra
     Hostettler
     Hulshof
     Hunter
     Hyde
     Inglis (SC)
     Inslee
     Issa
     Istook
     Jenkins
     Jindal
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     Kuhl (NY)
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas
     Lungren, Daniel E.
     Mack
     Manzullo
     Marchant
     Matheson
     McCaul (TX)
     McCotter
     McCrery
     McHenry
     McHugh
     McIntyre
     McKeon
     McMorris
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moore (KS)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Neugebauer
     Ney
     Norwood
     Nunes
     Nussle
     Ortiz
     Osborne
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Poe
     Pombo
     Porter
     Price (GA)
     Pryce (OH)
     Putnam
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reichert
     Renzi
     Reyes
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Royce
     Ruppersberger
     Ryan (OH)
     Ryan (WI)
     Ryun (KS)
     Salazar
     Saxton
     Schmidt
     Schwarz (MI)
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (NJ)
     Smith (TX)
     Snyder
     Sodrel
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Tanner
     Tauscher
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiberi
     Turner
     Upton
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Westmoreland
     Wexler
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NOES--166

     Abercrombie
     Ackerman
     Baca
     Baird
     Baldwin
     Barrow
     Becerra
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Carnahan
     Carson
     Chandler
     Clay
     Cleaver
     Clyburn
     Conyers
     Cooper
     Costello
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dingell
     Doggett
     Doyle
     Emanuel
     Engel
     Eshoo
     Etheridge
     Farr
     Filner
     Frank (MA)
     Gonzalez
     Green, Al
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Herseth
     Higgins
     Hinchey
     Holden
     Holt
     Honda
     Hooley
     Hoyer
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick (MI)
     Kind
     Kucinich
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren, Zoe
     Lowey
     Lynch
     Maloney
     Markey
     Marshall
     Matsui
     McCarthy
     McCollum (MN)
     McDermott
     McGovern
     McKinney
     Meehan
     Meek (FL)
     Meeks (NY)
     Melancon
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore (WI)
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Ross
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Schakowsky
     Schiff
     Schwartz (PA)
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Smith (WA)
     Solis
     Spratt
     Stark
     Strickland
     Stupak
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Wasserman Schultz
     Waters
     Watt
     Waxman
     Weiner
     Woolsey
     Wu
     Wynn

                             NOT VOTING--11

     Davis, Jo Ann
     Evans
     Fattah
     McNulty
     Northup
     Platts
     Ros-Lehtinen
     Sessions
     Slaughter
     Tiahrt
     Watson


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (during the vote). There are 2 minutes 
remaining in this vote.

                              {time}  1521

  Mr. COSTELLO, Ms. CORRINE BROWN of Florida, and Mr. MEEKS of New York 
changed their vote from ``aye'' to ``no.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________