Today, the House put its final approval on Congressman Michael G. Fitzpatrick’s bill to protect investors by reforming the credit ratings industry. The House passed the Senate version of Fitzpatrick’s legislation, S. 3850, by voice vote.
“Today’s passage of this important reform legislation demonstrates Congress’ commitment to protecting the individual investor and creating a more accountable and competitive market in our financial services industry,” Fitzpatrick said.
“S&P and Moody’s made serious errors in assuring investors that Enron and WorldCom were safe investments just days before they filed for bankruptcy. This may not have been the case if more ratings firms were allowed the same SEC recognition that Moody’s and S&P enjoyed. Unfortunately, SEC rules prevented smaller firms with better information from alerting investors about Enron and WorldCom’s true health.”
“The duopoly that exists between Moody’s and S&P must be broken and this legislation would do just that,” Fitzpatrick stated. “Creating a clear, defined and accountable registration process for credit ratings firms which will create competition, increase the quality of ratings and providing better information for investors.” Fitzpatrick added.
S&P and Moody’s rate more than 99 percent of the debt and preferred stock issues in the U.S and account for about 80 percent of the rating industry revenues due to the Securities and Exchange Commission’s (SEC) arcane and artificial barrier to entry. While over 130 credit rating agencies exist, today only five Credit Rating Agencies have been approved – nationally recognized – by the SEC to participate in the marketplace besides S& P and Moody’s. As a result, S&P and Moody’s are raking in record fees.
On June 20, 2005, Fitzpatrick introduced the Credit Rating Agency Duopoly Relief Act, H.R. 2990, to create more accountability, transparency and competition into the credit ratings industry. On July 12th the House passed Fitzpatrick’s legislation by a vote of 255 to 166 (Roll Call: 368). Today’s vote will send Fitzpatrick’s legislation to the President’s desk to be signed into law.
Congressman Mike Fitzpatrick is serving his first term as Representative of the 8th District of Pennsylvania, which includes Bucks County and portions of Montgomery County and Philadelphia.
