Credit Rating Agencies: Current Federal Oversight and Congressional Concerns (CRS Report for Congress)
| Release Date |
Revised Sept. 26, 2006 |
| Report Number |
RS22215 |
| Report Type |
Report |
| Authors |
Michael V. Seitzinger, American Law Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Credit rating agencies rate the creditworthiness of public companies so that the public will have an objective opinion as to the risk of investment. These ratings have become an important component of the financial reputation of a rated company. However, especially since the bankruptcies of Enron and WorldCom, whose debt had been rated investment grade, there has been concern that perhaps credit rating agencies should be regulated. Section 702 of the Sarbanes-Oxley Act of 2002 required the Securities and Exchange Commission to study the role of credit rating agencies. Over the years, the SEC has issued reports and proposed rules, in particular concerning adoption of a definition for the term "nationally recognized statistical rating organization," but no statutory or regulatory requirements have been enacted or issued. Congress may, however, continue to pursue the issue of regulation, since hearings have been held on the issue and proposed legislation has been introduced. On June 14, 2006, the House Committee on Financial Services approved an amended version of H.R. 2990, the Credit Rating Agency Duopoly Relief Act of 2006, which would set out procedures for registration by a credit rating agency with the SEC in order to be treated as a nationally recognized statistical rating organization. On July 12, 2006, the House passed H.R. 2990 in a version almost identical to the one approved by the Committee on Financial Services. On September 6, 2006, S. 3850, similar to a measure approved by the Senate Committee on Banking, Housing, and Urban Affairs on August 2, 2006, originated in the Senate. S. 3850, which is very similar to the House-passed H.R. 2990, was passed by unanimous consent by the Senate on September 22, 2006. This report will be updated as needed.
