I 

111TH CONGRESS 

1ST SESSION H. R. 2549 

To ensure uniform and accurate credit rating of municipal bonds and provide 

for a review of the municipal bond insurance industry. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. CAPUANO (for himself, Mr. MAFFEI, Mr. KANJORSKI, Mr. FRANK of Massachusetts, Mr. CLEAVER, Mr. BACA, Mr. MORAN of Virginia, Mr. ANDREWS, and Mr. CONNOLLY of Virginia) introduced the following bill; 

which was referred to the Committee on Financial Services 

A BILL 

To ensure uniform and accurate credit rating of municipal 

bonds and provide for a review of the municipal bond 

insurance industry. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Municipal Bond Fair5 ness Act’’. 

6 SEC. 2. PRESERVATION OF AUTHORITY TO PREVENT DIS7 CRIMINATION. 

8 Section 15E of the Securities Exchange Act of 1934 

9 (15 U.S.C. 78o–7) is amended— 


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1 (1) by redesignating subsection (p) as sub2 section (q); and 

3 (2) by inserting after subsection (o) the fol4 lowing new subsection: 

5 ‘‘(p) RATINGS CLARITY AND CONSISTENCY.— 

6 ‘‘(1) COMMISSION OBLIGATION.—Subject to 

7 paragraphs (2) and (3), the Commission shall re8 quire each nationally recognized statistical rating or9 ganization that is registered under this section to es10 tablish, maintain, and enforce written policies and 

11 procedures reasonably designed— 

12 ‘‘(A) to establish and maintain credit rat13 ings with respect to securities and money mar14 ket instruments designed to assess the risk that 

15 investors in securities and money market in16 struments may not receive payment in accord17 ance with the terms of issuance of such securi18 ties and instruments; 

19 ‘‘(B) to define clearly any rating symbol 

20 used by that organization; and 

21 ‘‘(C) to apply such rating symbol in a con22 sistent manner for all types of securities and 

23 money market instruments. 

24 ‘‘(2) ADDITIONAL CREDIT FACTORS.—Nothing 

25 in paragraph (1)(A), (B), or (C)— 


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1 ‘‘(A) prohibits a nationally recognized sta2 tistical rating organization from using addi3 tional credit factors that are documented and 

4 disclosed by the organization and that have a 

5 demonstrated impact on the risk an investor in 

6 a security or money market instrument will not 

7 receive repayment in accordance with the terms 

8 of issuance; 

9 ‘‘(B) prohibits a nationally recognized sta10 tistical rating organization from considering 

11 credit factors that are unique to municipal se12 curities that are not backed by the issuer’s full 

13 faith and credit in its assessment of the risk an 

14 investor in a security or money market instru15 ment will not receive repayment in accordance 

16 with the terms of issuance; or 

17 ‘‘(C) prohibits a nationally recognized sta18 tistical rating organization from using an addi19 tional symbol with respect to the ratings de20 scribed in paragraph (1)(A) for the purpose of 

21 distinguishing the ratings of a certain type of 

22 security or money market instrument from rat23 ings of any other types of securities or money 

24 market instruments. 


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1 ‘‘(3) COMPLEMENTARY RATINGS.—The Com2 mission shall not impose any requirement under 

3 paragraph (1) that prevents nationally recognized 

4 statistical rating organizations from establishing rat5 ings that are complementary to the ratings described 

6 in paragraph (1)(A) and that are created to measure 

7 a discrete aspect of the security’s or instrument’s 

8 risk. 

9 ‘‘(4) REVIEW.— 

10 ‘‘(A) PERFORMANCE MEASURES.—The 

11 Commission shall, by rule, establish perform12 ance measures that the Commission shall con13 sider when deciding whether to initiate a review 

14 concerning whether a nationally recognized sta15 tistical rating organization has failed to adhere 

16 to such organization’s stated procedures and 

17 methodologies for issuing ratings on securities 

18 or money market instruments. 

19 ‘‘(B) CONSIDERATION OF EVIDENCE.— 

20 Performance measures the Commission may 

21 consider in initiating a review of an organiza22 tion’s ratings in each of the categories described 

23 in clauses (i) through (v) of section 3(a)(62)(B) 

24 during an appropriate interval (as determined 


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1 by the Commission) include the transition and 

2 default rates of its in discrete asset classes.’’. 

3 SEC. 3. IMPLEMENTATION. 

4 The Securities and Exchange Commission shall pre5 scribe rules to implement the amendments made by sec6 tion 101 within 270 days after the date of enactment of 

7 this Act. 

Æ 


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