HR 6308 IHRHCommentsClose CommentsPermalink

To ensure uniform and accurate credit rating of municipal bonds and provide for a review of the municipal bond insurance industry.CommentsClose CommentsPermalink

June 19, 2008CommentsClose CommentsPermalink

Mr. FRANK of Massachusetts (for himself, Mr. CAPUANO, and Mr. KANJORSKI) introduced the following bill; which was referred to the Committee on Financial ServicesCommentsClose CommentsPermalink

To ensure uniform and accurate credit rating of municipal bonds and provide for a review of the municipal bond insurance industry.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Municipal Bond Fairness Act’. CommentsClose CommentsPermalink

TITLE I--DISCRIMINATORY RATINGS TREATMENT OF STATE AND MUNICIPAL SECURITIES CommentsClose CommentsPermalink

SEC. 101. PRESERVATION OF AUTHORITY TO PREVENT DISCRIMINATION.

Section 15E(c)) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-7(c))) is amended-- CommentsClose CommentsPermalink





(1) in paragraph (2), by striking ‘Notwithstanding’ and inserting ‘Subject to paragraph (3), but notwithstanding’by redesignating subsection (p) as subsection (q); and CommentsClose CommentsPermalink





(2) by adding at the endinserting after subsection (o) the following new paragraphs:‘(3) RATINGS CLARITY AND CONSISTENCY-‘(Asubsection: CommentsClose CommentsPermalink





‘(p) Ratings Clarity and Consistency- CommentsClose CommentsPermalink





‘(1) COMMISSION OBLIGATION- Subject to subparagraph (B), but notwithstanding any other provision of this subsectionparagraphs (2) and (3), the Commission shall require each nationally recognized statistical rating organization that is registered under this section to establish, maintain, and enforce written policies and procedures reasonably designed-- CommentsClose CommentsPermalink





‘(iA) to establish and maintain credit ratings with respect to securities and money market instruments designed to assess the risk that investors in securities and money market instruments may not receive payment in accordance with the terms of issuance of such securities and instruments; CommentsClose CommentsPermalink





‘(iiB) to define clearly any rating symbol used by that organization; and CommentsClose CommentsPermalink





‘(iiiC) to apply such rating symbol in a consistent manner for all types of securities and money market instruments to which that symbol is assigned.‘(B. CommentsClose CommentsPermalink





‘(2) ADDITIONAL CREDIT FACTORS- Nothing in paragraph (1)(A), (B), or (C)-- CommentsClose CommentsPermalink





‘(A) prohibits a nationally recognized statistical rating organization from using additional credit factors that are documented and disclosed by the organization and that have a demonstrated impact on the risk an investor in a security or money market instrument will not receive repayment in accordance with the terms of issuance; or CommentsClose CommentsPermalink





‘(B) prohibits a nationally recognized statistical rating organization from considering credit factors that are unique to municipal securities that are not backed by the issuer’s full faith and credit in its assessment of the risk an investor in a security or money market instrument will not receive repayment in accordance with the terms of issuance. CommentsClose CommentsPermalink





‘(3) COMPLEMENTARY RATINGS- The Commission shall not impose any requirement under subparagraph (Aparagraph (1) that prevents nationally recognized statistical rating organizations from establishing ratings that are complementary to the ratings described in subparagraph (A)(iparagraph (1)(A) and that are created to measure a discrete aspect of the security’s or instrument’s risk. CommentsClose CommentsPermalink





‘(4) REVIEW- CommentsClose CommentsPermalink





‘(A) PERFORMANCE MEASURES- For purposes of paragraph (1), tThe Commission shall, by rule, establish performance measures to be used to determine whenhat the Commission shall consider when deciding whether to initiate a review concerning whether a nationally recognized statistical rating organization --‘(i) has issued ratings in material contravention of the procedures described in paragraph (1); or‘(ii) has failed to adhere to such organization’s stated procedures and methodologies for issuing such ratingratings on securities or money market instruments. CommentsClose CommentsPermalink





‘(B) CONSIDERATION OF EVIDENCE- The rules required by subparagraph (A) shall require the consideration of evidence of performance of thePerformance measures the Commission may consider in initiating a review of an organization’s ratings in each of the categories described in clauses (i) through (v) of section 3(a)(62)(B) during an appropriate interval (as determined by the Commission), including aggregate transition of rating include the transition and default rates of its in discrete asset classes.’. CommentsClose CommentsPermalink

TITLE II--REVIEW OF MUNICIPAL BOND INSURANCE INDUSTRY CommentsClose CommentsPermalink

SEC. 201. AUTHORITY OF SECRETARY.

(a) Collection and Use ofAuthority To Receive and Collect Information- Except as provided inSubject to subsection (b), the Secretary of the Treasury shall have the authority to receive, analyze, collect, and disseminate information, data, and material, and and collect (directly from the States and other sources), and to analyze and disseminate, data and information, and to issue reports, regarding entities that insure or guarantee the payment of any portion of the principal and interest of any municipal obligation, including information, data, and material regarding-- CommentsClose CommentsPermalink





(1) financial safety and soundness of such entities; CommentsClose CommentsPermalink





(2) concentration of insurance liabilities of such entities; CommentsClose CommentsPermalink





(3) performance of such entities under various scenarios of macro- and micro-economic stress; CommentsClose CommentsPermalink





(4) underwriting standards for such entities; and CommentsClose CommentsPermalink





(5) risk management of such entities. CommentsClose CommentsPermalink





(b) Protection of Privacy- ALimitations- With respect to the authority under subsection (a)-- CommentsClose CommentsPermalink





(1) the submission of any non-publicly available data and information to the Secretary shall be voluntary and such submission shall not constitute a waiver of, or otherwise affect, any privilege or confidentiality protection to which the data or information is otherwise subject; CommentsClose CommentsPermalink





(2) to the extent that any such data and information has already been received or collected by, or can efficiently be received or collected by, the States (including the insurance commissioners of the States), the National Association of Insurance Commissioners, or any other appropriate source, the Secretary may enter into an information-sharing agreement with such source to provide for the receipt of such data by the Secretary; CommentsClose CommentsPermalink





(3) any requirement under Federal or State law to the extent otherwise applicable, or any requirement pursuant to a written agreement in effect between the Secretary and the National Association of Insurance Commissioners or any member or affiliate of such Associationoriginal source of any non-publicly available data or information and the source of such data or information to the Secretary, regarding the privacy or confidentiality of any information, data, or material in the possession of the Secretary or such Association or any member or affiliate of such Associationdata or information in the possession of the source to the Secretary, and any privilege arising under Federal or State law (including the rules of any Federal or State court) with respect to such information, data, or materialdata or information, shall continue to apply to such information, data, or material after the information, data, or material has, pursuant to subsection (a),data or information after the data or information has been provided to or otherwise collected or received by the Secretary or such Association or any member or affiliate of such Association.SEC. 202. SOURCES OF INFORMATION.The Secretary pursuant to this subsection to the Secretary; CommentsClose CommentsPermalink





(4) the Secretary shall treat as confidential and privileged any data or information obtained from any source that is entitled to confidential treatment under applicable State or Federal law or regulations, or under any agreement to which the source is a party and shall take all reasonable steps to oppose any effort to secure disclosure of the data or information by the Secretary; CommentsClose CommentsPermalink





(5) the Secretary may collect and receive information, data, and material not in any case disclose to any party any personally identifiable information received or collected by the Secretary pursuant to section 201 from State insurance regulatory authorities, the National Association of Insurance Commissioners, and any other sources the Secretary determines are crediblthis subsection; and CommentsClose CommentsPermalink





(6) any non-publicly available data and information received or collected by the Secretary pursuant to this subsection shall be considered trade secrets and commercial or financial information that is privileged and confidential pursuant tosection 552(b)(4) of title 5, United States Code. CommentsClose CommentsPermalink

SEC. 2032. REPORTS TO CONGRESS.

The Secretary shall submit a report annually to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on the financial state of the industry for insurance and guarantee of municipal bonds, meaningful trends in such industry, and the potential impacts on the overall financial system in the United States that entities that providing such insurance and guarantees could have under various scenarios of macro- and micro-economic stress. CommentsClose CommentsPermalink

SEC. 2043. RETENTION OF EXISTING REGULATORY AUTHORITY.

This title may not be construed to establish any supervisory or regulatory authority of the Secretary over any entity that insures or guarantees the payment of any portion of the principal and interest of any municipal obligation. CommentsClose CommentsPermalink

SEC. 2054. DEFINITIONS.

For purposes of this title, the following definitions shall apply: CommentsClose CommentsPermalink





(1) MUNICIPAL OBLIGATION- The term ‘municipal obligation’ means any bond, note, security, or other debt obligation issued by any State, any political subdivision of a State, one or more political subdivisions of a State, or a State and one or more of its political subdivisions, or by any agency, department, office, authority, or other instrumentality of a State, any political subdivision of a State, one or more political subdivisions of a State, or a State and one or more of its political subdivisions, or by any other entity eligible to issue bonds the interest on which is excludable from gross income under section 103 of the Internal Revenue Code of 1986. CommentsClose CommentsPermalink





(2) POLITICAL SUBDIVISION- The term ‘political subdivision’ includes any city, county, town, township, parish, village, or other general purpose political subdivision of a State and any school, utility, fire, or tax district, or other special purpose political subdivision of a State. CommentsClose CommentsPermalink





(3) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury. CommentsClose CommentsPermalink





(4) STATE- The term ‘State’ means the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, and any other territory or possession of the United States. CommentsClose CommentsPermalink

SEC. 2065. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated to the Secretary for carrying out this title such sums as may be necessary for each fiscal year. CommentsClose CommentsPermalink