[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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