Grassley Joins Franken Proposal To End Conflicts Of Interest In Credit Rating Agencies
Press Release
Grassley Joins Franken Proposal To End Conflicts Of Interest In Credit Rating Agencies
Today, U.S. Sen. Charles Grassley (R-Iowa) announced his support for Sen. Al Franken's (D-Minn.) amendment to end the conflicts of interest inherent in Wall Street's current pay-to-play credit rating system. Right now, banks choose which credit rating agencies will rate the quality of their bonds and other financial products, resulting in the agencies giving away undeserved top ratings to countless sub-par financial products in order to attract business.
"Chuck Grassley has been a consistent champion of consumer protections and of eliminating conflicts of interest wherever he sees them," said Sen. Franken. "Iowa and Minnesota share a certain sensibility -- a commitment to fairness and honesty. Wall Street's current system just isn't honest and it's time we clean it up. I'm glad this common-sense initiative has the support of colleagues on both sides of the aisle."
"If the credit rating agencies are going to make a contribution to market integrity, then they can't be compromised," said Sen. Grassley. "This amendment creates a firewall so that a rating agency can be selected independent of an issuer. It goes after conflicts of interest between rating agencies and issuers, and that's a very important area where due diligence was missing leading up to the financial crisis of 2008."
Sen. Franken's Restore Integrity To Credit Ratings amendment is also co-sponsored by Roger Wicker (R-Miss.), Charles E. Schumer (D-N.Y.), Bill Nelson (D-Fla.), Sheldon Whitehouse (D-R.I.), Sherrod Brown (D-Ohio), Patty Murray (D-Wash.), Jeff Merkley (D-Ore.), Jeff Bingaman (D-N.M.), Frank Lautenberg (D-N.J.), Jeanne Shaheen (D-N.H.), Robert Casey (D-Pa.), Bernard Sanders (I-Vt.), and Tim Johnson (D-S.D.).
It would clean up the system by making sure a bank or financial institution can't shop around among credit rating agencies to get a product's initial rating. The bipartisan proposal would create a board, overseen by the Securities and Exchange Commission, which would assign credit rating agencies to provide initial ratings in order to eliminate inherent conflicts of interest.
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