LeMieux Amendment Would End NRSRO Designation

September 22, 2010 by · Leave a Comment
Filed under: Bond Regulation, FDIC, The Rating Agencies 

The financial regulatory reform bill that was passed by the Senate includes an amendment intended to “make banks, mutual funds and regulators do their own financial homework.” Sponsored by Senator George S. LeMieux (R-FL), the LeMieux-Cantwell provision was approved by a 61 to 38 vote.

It requires regulators such as the Federal Deposit Insurance Corporation to develop their own standards of creditworthiness instead of depending exclusively on credit rating agencies’ assessments. What’s more, the Lemieux-Cantwell amendment would eliminate the preference for ratings issued by a “nationally recognized statistical rating organization” (NRSRO) by removing references to it in regulations. Mr. LeMieux says these federal endorsements have created “a government-sponsored monopoly.”

This echoes Barney Frank’s language in the House bill. If rating agencies are so corrupt, and the ratings so wrong, let’s de-certify them and let investors do their own homework. If you can’t measure credit, you shouldn’t be in the game.

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