This vote was on an amendment by Al Franken, D-Minn., that would require certain kinds of investment vehicles to have initial credit ratings assigned by a newly-created, independent board. The amendment was offered to a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee complex financial investments.
Franken said his amendment attempts to eliminate a conflict of interest in the credit rating industry as it presently operates. Franken said at the moment, companies that issue securities also pay for these securities to be issued a credit rating from various credit rating agencies. This credit rating is supposed to be a measure of how creditworthy an investment is and consumers use it to decide whether something is a wise investment. Franken said companies “shop around” for the agency that will issue them the best credit rating instead of the truest one. Therefore, credit rating agencies that seek to satisfy companies whose financial instruments are being rated tend to get repeat business, while others do not.
No one spoke against Franken’s amendment, although George LeMieux, R-Fla., did offer a separate amendment that took a different tack. LeMieux’s amendment would remove any mandates in current law requiring financial investments to be issued a credit rating by a certified rating agency (see vote 147).
By a vote of 64-35, Franken’s amendment was adopted. All but four Democrats present voted for the amendment. Of Republicans present, 11 voted for the amendment and 30 voted against it. The end result is that the measure went forward with language that would require credit ratings for certain kinds of complex financial investments to be issued by a newly-created independent board, instead of by a credit rating agency.