[Congressional Record Volume 166, Number 163 (Monday, September 21, 2020)]
[House]
[Pages H4602-H4603]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1615
                    UNIFORM TREATMENT OF NRSROS ACT

  Mr. SHERMAN. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 6934) to amend the CARES Act to require the uniform 
treatment of nationally recognized statistical rating organizations 
under certain programs carried out in response to the COVID-19 
emergency, and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 6934

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Uniform Treatment of NRSROs 
     Act''.

     SEC. 2. UNIFORM TREATMENT OF NRSROS.

       (a) In General.--Section 4003 of the CARES Act (15 U.S.C. 
     9042), as amended by section 902, is further amended by 
     adding at the end the following:
       ``(m) Uniform Treatment of NRSROs.--
       ``(1) In general.--If, in carrying out this section or any 
     other program making use of a facility established under 
     section 13(3) of the Federal Reserve Act in response to the 
     COVID-19 emergency, the Secretary of the Treasury or the 
     Board of Governors of the Federal Reserve System establishes 
     a requirement for an entity, security, or other instrument to 
     carry a minimum credit rating, the Secretary or the Board of 
     Governors shall accept credit ratings provided by any 
     nationally recognized statistical rating organization with 
     respect to such entity, security, or other instrument, if the 
     nationally recognized statistical rating organization is 
     registered with the Securities and Exchange Commission to 
     issue credit ratings with respect to the applicable asset 
     class of the entity, security, or other instrument.
       ``(2) Exception.--
       ``(A) In general.--The Secretary or the Board of Governors 
     may exclude a nationally recognized statistical rating 
     organization from the application of paragraph (1) if, in 
     consultation with the Securities and Exchange Commission, the 
     Secretary or Board of Governors, as applicable, determines 
     that the nationally recognized statistical rating 
     organization is unable to provide reliable and accurate 
     ratings for a particular asset class and that such exclusion 
     is in the public interest.
       ``(B) Report.--If the Secretary or the Board of Governors 
     excludes a nationally recognized statistical rating 
     organization from the application of paragraph (1) pursuant 
     to subparagraph (A), the Secretary or Board of Governors, as 
     applicable, shall, as soon as practicable after such 
     exclusion, disclose to the public the reasoning for such 
     exclusion.
       ``(3) Nationally recognized statistical rating 
     organization.--In this subsection, the term `nationally 
     recognized statistical rating organization' has the meaning 
     given that term under section 3 of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78c).''.
       (b) GAO Study.--
       (1) Study.--The Comptroller General of the United States 
     shall carry out a study on--
       (A) the quality of credit ratings across nationally 
     recognized statistical ratings organizations (as defined 
     under section 3 of the Securities Exchange Act of 1934), 
     including during the 2008 economic crisis;
       (B) the effect of competition on the quality of credit 
     ratings and on the ability of small- and mid-size companies 
     and financial institutions to access the capital markets; and
       (C) the implementation of the amendment made by subsection 
     (a).
       (2) Report.--Not later than one year after the date of 
     enactment of this Act, the Comptroller General shall issue a 
     report to the Congress containing all finding and 
     determinations made in carrying out the study required under 
     paragraph (1).

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California (Mr. Sherman) and the gentleman from South Carolina (Mr. 
Timmons) each will control 20 minutes.
  The Chair recognizes the gentleman from California.


                             General Leave

  Mr. SHERMAN. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days within which to revise and extend their remarks 
on this legislation and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  Mr. SHERMAN. Mr. Speaker, I yield myself as much time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 6934, the Uniform Treatment of 
NRSROs, which is sponsored by Congresswoman Dean from Pennsylvania.
  This important legislation from Congresswoman Dean will ensure that 
qualified issuers have fair access to lending facilities, and it will 
ensure that these facilities are granted on clear terms.
  This is not a time where agencies such as the Federal Reserve should 
just make it up as they go along, especially when these policies 
disproportionately harm small and mid-sized companies. Thus, my 
colleague, Ms. Dean, introduced, and I was pleased to cosponsor, 
legislation to provide clarity in the lending process by ensuring that 
nationally recognized statistical rating organizations, also referred 
to as NRSROs, are treated uniformly.
  More specifically, the Federal Reserve and Treasury often require a 
credit rating to apply for participation in a lending facility. When 
there is such a requirement, the Federal Reserve has, at times, 
required that the rating be issued by a specific credit rating agency 
or has required that the rating be from a specific category of NRSROs, 
such as the so-called major NRSROs.
  Often, these categories are self-created by the Federal Reserve and 
have been undefined and unclear to issuers. These requirements act as 
an obstacle between issuers and these lending facilities. This clearly 
was not Congress' intent, as it goes against Dodd-Frank, which mandates 
that we foster competition among NRSROs rather than trying to make sure 
that companies rely only on an oligarchy of three NRSROs.
  As chair of the Subcommittee on Investor Protection, 
Entrepreneurship, and Capital Markets, I am quite familiar with the 
work that has been done in the last decade to end overreliance on the 
big three credit agencies, which led us into the 2008 crisis. It is 
those big three that gave AAA ratings to Alt-A lendings, which I 
believe is what caused the 2008 crisis.
  Decisions by the Fed and Treasury with respect to many lending 
facilities have threatened to undo our work to try to diversify the 
availability of different NRSROs.
  H.R. 6934, which is limited to facilities which have been stood up in 
response to the COVID-19 pandemic, will set clear credit rating 
standards for both the Federal Reserve and its issuers. It also 
clarifies Congress' intent and will ensure that its legislative 
objectives are carried out at the agency level.
  Most importantly, however, the legislation will result in more 
issuers having access to these lending facilities, an important 
objective during this pandemic and economic downturn, while it will 
still ensure that there are standards in effect that will adequately 
protect the facility and the interests of the taxpayer.
  Mr. Speaker, I greatly appreciate Congresswoman Dean's leadership in 
bringing forth this important legislation, and I reserve the balance of 
my time.
  Mr. TIMMONS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would like to thank the gentlewoman from Pennsylvania 
(Ms. Dean) for introducing this bipartisan bill.
  Since the early days of the pandemic, the Federal Reserve has acted 
swiftly to ensure liquidity is available to companies of all sizes 
across the country. The emergency facilities support businesses and, in 
turn, their workers and customers.
  The committee has continually called for a broad-based approach to 
aid our businesses and communities throughout this economic crisis. 
H.R. 6934 simply encourages the Federal Reserve to include companies 
that have credit ratings from all SEC-registered and supervised NRSROs 
as participants in its emergency facilities.
  Though the Federal Reserve revised some of the requirements for 
companies with credit ratings from smaller

[[Page H4603]]

NRSROs, there are still companies left on the sidelines. This bill will 
ensure small and mid-sized businesses have access to the facilities 
that provide necessary support.
  An open and transparent process is essential to the success of the 
emergency facilities. This bill supports that process.

  Mr. Speaker, I urge my colleagues to support the bill, and I reserve 
the balance of my time.
  Mr. SHERMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
Pennsylvania (Ms. Dean), the author of this legislation.
  Ms. DEAN. Mr. Speaker, I thank my colleague and friend and chair for 
yielding, and I thank my colleague on the other side of the aisle for 
his support for this bill.
  Mr. Speaker, I rise in support of H.R. 6934, the Uniform Treatment of 
NRSROs Act.
  NRSROs are nationally recognized statistical rating agencies. This is 
a bipartisan bill that addresses businesses' need for greater access to 
Federal lending facilities in the time of COVID and a uniform treatment 
of credit rating agencies in the application process for these much-
needed loans.
  In response to the economic crisis resulting from the COVID-19 
pandemic, several lending facilities have been created to assist 
struggling businesses at this difficult time. The Federal Reserve and 
Treasury, however, have limited access to these facilities to 
businesses whose assets have been rated by only a select few credit 
rating agencies, making it unnecessarily difficult for many businesses 
to access much-needed resources.
  In Pennsylvania alone, several small and mid-sized companies as well 
as municipal bond issuers have been excluded from the facilities or 
have their ratings from nonapproved rating agencies called into 
question by the market.
  This legislation seeks to remove these barriers by amending the CARES 
Act to require that the Federal Reserve and Treasury accept ratings 
from any nationally recognized statistical rating organization, or 
NRSRO. This would have the effect of opening up access to the 
facilities to issuers with a rating from any duly recognized NRSRO that 
has been approved in the relevant asset class by the SEC.
  This legislation would also require the Comptroller General to issue, 
within 1 year of enactment, a study on the quality of credit rating 
agencies across NRSROs, including during the 2008 crisis. The study 
would also explore the effect of competition on the quality of credit 
ratings and on the ability of small and mid-sized companies and 
financial institutions to access the capital markets.
  At a time of unprecedented economic uncertainty, we need to make sure 
that small and mid-sized businesses have access to capital markets 
needed to survive and recover. By expanding eligible NRSROs, this 
legislation opens up access, transparency, and healthy competition, 
without compromising quality, at a time when it is needed most.
  Mr. Speaker, I thank Chairwoman Waters, the Financial Services 
Committee staff, and, importantly, my Republican colead, Representative 
  Andy Barr, for their work on this legislation to help struggling 
businesses get the capital they need.
  Mr. Speaker, I urge my colleagues to support this legislation.
  Mr. TIMMONS. Mr. Speaker, I am prepared to close.
  I would simply urge my colleagues to support H.R. 6934, and I yield 
back the balance of my time.
  Mr. SHERMAN. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, I again would like to thank my colleague from 
Pennsylvania (Ms. Dean) for introducing, supporting, and, in effect, 
passing this legislation here today. It will help qualified issuers 
have access to lending facilities; it will ensure that that access to 
facilities is granted on terms that are clear; and it will ensure that 
Congress' legislative intent is carried out and is consistent with the 
policy of Congress that we have focused on in the Investor Protection, 
Entrepreneurship, and Capital Markets Subcommittee to make sure that we 
are not overly reliant on just three credit rating agencies.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from California (Mr. Sherman) that the House suspend the 
rules and pass the bill, H.R. 6934, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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