I 

111TH CONGRESS 

1ST SESSION H. R. 3128 

To amend the Federal Reserve Act to authorize Federal Reserve Banks 

to examine the methodologies of used by nationally recognized statistical 

rating organizations in analyzing and rating asset backed securities and 

structured finance products. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 8, 2009 

Mr. ELLISON introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To amend the Federal Reserve Act to authorize Federal 

Reserve Banks to examine the methodologies of used 

by nationally recognized statistical rating organizations 

in analyzing and rating asset backed securities and structured finance products. 

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

3 SECTION 1. EXAMINATION AUTHORITY WITH RESPECT TO 

4 NATIONALLY RECOGNIZED STATISTICAL RAT5 ING ORGANIZATIONS. 

6 Section 13 of the Federal Reserve Act is amended 

7 by adding at the end the following new paragraph: 


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1 ‘‘(15) EXAMINATION AUTHORITY WITH RE2 SPECT TO NATIONALLY RECOGNIZED STATISTICAL

3 RATING ORGANIZATIONS.— 

4 ‘‘(A) IN GENERAL.—The Board may au5 thorize any Federal reserve bank to examine 

6 the methodologies used by nationally recognized 

7 statistical rating organizations in analyzing and 

8 rating asset backed securities and structured fi9 nance products. Such examinations shall be 

10 subject to such limitations, restrictions, and 

11 regulations as the Board may prescribe. 

12 ‘‘(B) DEFINITIONS.—For purposes of this 

13 paragraph: 

14 ‘‘(i) ASSET BACKED SECURITY.—The 

15 term ‘asset backed security’ means— 

16 ‘‘(I) a security that is primarily 

17 serviced by the cash flows of a dis18 crete pool of receivables or other fi19 nancial assets (including mortgages), 

20 either fixed or revolving, that by their 

21 terms convert into cash within a finite 

22 time period, plus any rights or other 

23 assets designed to assure the servicing 

24 or timely distributions of proceeds to 

25 the security holders; and 


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1 ‘‘(II) such other security as the 

2 Board may prescribe. 

3 ‘‘(ii) NATIONALLY RECOGNIZED STA4 TISTICAL RATING ORGANIZATION.—The 

5 term ‘nationally recognized statistical rat6 ing organization’ has the same meaning as 

7 in section 3(a)(62) of the Securities Ex8 change Act of 1934 (15 U.S.C. 

9 78c(a)(62)). 

10 ‘‘(iii) SECURITY.—The term ‘security’ 

11 has the same meaning as in section 

12 3(a)(10) of the Securities Exchange Act of 

13 1934 (15 U.S.C. 78c(a)(10)). 

14 ‘‘(iv) STRUCTURED FINANCE PROD15 UCT.—The term ‘structured finance prod16 uct’ means a product that includes— 

17 ‘‘(I) the pooling of assets (either 

18 cash-based or synthetically created); 

19 ‘‘(II) the tranching of liabilities 

20 that are backed by such assets; 

21 ‘‘(III) de-linking of the credit 

22 risk of such assets from the credit 

23 risk of the originator (usually through 

24 use of a finite-lived, standalone fi25 nancing vehicle); or 


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1 ‘‘(IV) such other elements as the 

2 Board may prescribe.’’. 

Æ 


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