Chairman Barney Frank Introduces Uniform Credit Ratings LegislationHouse Financial Services Chairman Barney Frank (D-MA) and Representative Richard Neal (D-MA) introduced legislation that will limit the ability of the rating agencies to use separate standards for municipal bonds and other bonds. The Municipal Bond Fairness Act, H.R. 6308, will “require those credit rating agencies that choose to seek designation as a nationally recognized statistical rating organization (NRSRO) to use rating symbols consistently for every security to which they are assigned.” The legislation also directs the Secretary of Treasury to gather information on the financial stability of the bond insurance industry and report back to Congress.
In a press conference held June 20, Chairman Frank said, “One of the most damaging and unfair aspects of the financial crisis is the negative effect it is having on our inability to deal with our infrastructure problems. Specifically, it is an outrage that mistakes and indiscretions in the private financial sector have contributed to an increase in the interest rates that state and local governments have to pay for important projects. Full faith in credit general obligation municipal bonds are not getting the credit they deserve in the marketplace for the degree of security they offer the investor.” The GFOA and other state and local government and authorities associations sent a letter to Chairman Frank, supporting this legislation.
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