WASHINGTON (Reuters) - A U.S. lawmaker is seeking to gain bipartisan support for legislation that would tighten regulation of credit rating agencies, and he hopes for committee action on the bill in the next few weeks.
Representative Paul Kanjorski, chairman of the House Financial Services subcommittee on capital markets, told Reuters Television on Wednesday that he is reaching out to Republicans to gain co-sponsors for the bill.
“I think that’s necessary to really accomplish something long-term,” Kanjorski said.
Kanjorski circulated a draft bill last week that would give the U.S. Securities and Exchange Commission power to dictate how credit rating agencies determine ratings. He said that his subcommittee will meet to discuss and vote on the legislation in the next two to three weeks.
The legislation would then move to the full committee for consideration, before it could go before the full House of Representatives for a vote.
Kanjorski is holding a hearing on Wednesday afternoon to hear from top executives from the largest credit agencies — McGraw-Hill Cos Inc’s MHP.N Standard and Poor’s, Fimalac SA’s LBCP.PA Fitch Ratings and Moody’s Corp (MCO.N).
Earlier on Wednesday, another House panel held a hearing into why the U.S. Securities and Exchange Commission ignored warnings from former Moody’s executives about the company’s weak compliance department and ratings process.
The rating firms “played a starring role in the collapse of the financial system last year,” because they failed to capture the true risk of securities linked to poorly written mortgages, said Representative Edolphus Towns, chairman of the House Oversight and Government Reform Committee.
Kanjorski said his legislation is aimed at providing better standards of quality for the ratings agencies. He said they serve a critical role for investors, especially smaller investors who need advice on where to place their funds.
He also took aim at the SEC, saying it seemed like a “totally dysfunctional agency” in the way it handled probes that failed to catch Bernard Madoff’s $65 billion fraud.
Kanjorski said SEC Chairman Mary Schapiro is making necessary reforms within the agency, but said lawmakers may need to do more to improve the SEC.
“There may be cultural problems within the agency and the need for additional authorities within the agency,” he said.
Reporting by Karey Wutkowski, Editing by Leslie Gevirtz and Gerald E. McCormick