Amendment to Add Create Rating Board Passes

The Senate has approved an amendment to its financial regulatory reform bill that authorizes the Securities and Exchange Commission to create a new credit rating board that would assign a credit rating agency to companies seeking an “initial rating.”

The proposal would only affect “structured securities,” which are mortgage-backed bonds, asset-backed securities, and other debt-like instruments that declined in value during the financial crisis.

Standard & Poor’s spokesperson Edward Sweeney criticized the amendment for the deleterious effect he said it would have on credit rating agencies’ “incentive to compete with one another, pursue innovation, and improve their models, criteria, and methodologies.”

The provision, proposed by Senator Al Franken (D-MN), passed by 64 to 35, which means it is likely to remain part of the final bill.

Financial expert, market technician and capital market participant Al Franken solves the conflict issue. This is a stupid idea. Is there ever a problem that can’t be solved by “more government”?

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