Franken Battling Frank On Wall Street Reform
Al Franken is battling Barney Frank to save the life of a credit rating agency amendment that the freshman Minnesota Democrat was able to include in the Senate's Wall Street reform bill. Franken would bar banks from choosing which rating agency can rate which product -- the current system creates conflicts of interest leading to artificially rosy ratings. Under Franken's proposed system, raters would be assigned randomly to a financial institution, leaving them with the freedom to issue a poor rating without fear of losing business -- raters who are more accurate will get more business.
The House bill does not contain a similar measure and Frank, chairman of the House Financial Services Committee, says the amendment is untested and is offering Franken a study of the issue instead. Franken thinks a study isn't needed. Debate on Franken's measure begins at 11:00 a.m. Tuesday, when the conference committee convenes.
"The House language is very concerning. We don't believe a study is necessary," said Franken spokeswoman Jess McIntosh. "We know what went wrong with Wall Street's credit rating system -- conflicts of interest eroded it by rewarding cozy relationships instead of accuracy. And we know how to fix it -- the Franken amendment that passed the Senate with broad bipartisan support. The upside of a study is that they usually end with findings. And you can be sure that if such a study came back, it would confirm the conflicts of interest. It just makes more sense to end the delay and instate the reform now."
Steve Adamske, spokesman for Frank's committee, reacted sharply to McIntosh's defense. "The time for debate will be tomorrow at 11:00 am, not through the press by spokespeople protecting the people who sign their paycheck. Mr. Franken needs to talk to his Senate colleagues," Adamske told HuffPost Hill Monday evening.
Franken, notes McIntosh, did send a letter, also signed by Sen. Carl Levin (D-Mich.) and Roger Wicker (R-Miss.), addressed to conference committee leaders, including Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.).
"As the Permanent Subcommittee on Investigations clearly revealed in its April 23, 2010, hearing, the credit rating industry is plagued by conflicts of interest, in which the issuing banks pay credit rating agencies to rate their financial products. In order to retain clients, credit rating agencies have an incentive to provide inflated rating to even the riskiest products," reads the letter. Levin is chairman of the investigations committee.
Heather Booth, head of Americans for Financial Reform, said that her group is urging the conference to adopt Franken's measure, which has bipartisan support.