IB 
Union Calendar No. 536 
110TH CONGRESS 
2D SESSION 
H. R. 6308 
[Report No. 110–835] 
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 
JUNE 19, 2008 
Mr. FRANK of Massachusetts (for himself, Mr. CAPUANO, and Mr. KAN-
JORSKI) introduced the following bill; which was referred to the Com-
mittee on Financial Services 
SEPTEMBER 9, 2008 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on June 19, 2008] 
A BILL 
To ensure uniform and accurate credit rating of municipal 
bonds and provide for a review of the municipal bond 
insurance industry. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Municipal Bond Fair-
ness Act’’. 
TITLE I—DISCRIMINATORY RAT-
INGS TREATMENT OF STATE 
AND MUNICIPAL SECURITIES 
SEC. 101. PRESERVATION OF AUTHORITY TO PREVENT DIS-
CRIMINATION. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7) is amended— 
(1) by redesignating subsection (p) as subsection 
(q); and 
(2) by inserting after subsection (o) the following 
new subsection: 
‘‘(p) RATINGS CLARITY AND CONSISTENCY.— 
‘‘(1) COMMISSION OBLIGATION.—Subject to para-
graphs (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— 
‘‘(A) to establish and maintain credit rat-
ings with respect to securities and money market 
instruments designed to assess the risk that in-
vestors in securities and money market instru-
ments may not receive payment in accordance 
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with the terms of issuance of such securities and 
instruments; 
‘‘(B) to define clearly any rating symbol 
used by that organization; and 
‘‘(C) to apply such rating symbol in a con-
sistent manner for all types of securities and 
money market instruments. 
‘‘(2) ADDITIONAL CREDIT FACTORS.—Nothing in 
paragraph (1)(A), (B), or (C)— 
‘‘(A) prohibits a nationally recognized sta-
tistical rating organization from using addi-
tional 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 
‘‘(B) prohibits a nationally recognized sta-
tistical rating organization from considering 
credit factors that are unique to municipal secu-
rities 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 instru-
ment will not receive repayment in accordance 
with the terms of issuance. 
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‘‘(3) COMPLEMENTARY RATINGS.—The Commis-
sion shall not impose any requirement under para-
graph (1) that prevents nationally recognized statis-
tical rating organizations from establishing ratings 
that are complementary to the ratings described in 
paragraph (1)(A) and that are created to measure a 
discrete aspect of the security’s or instrument’s risk. 
‘‘(4) REVIEW.— 
‘‘(A) PERFORMANCE MEASURES.—The Com-
mission shall, by rule, establish performance 
measures that the Commission shall consider 
when deciding whether to initiate a review con-
cerning whether a nationally recognized statis-
tical rating organization has failed to adhere to 
such organization’s stated procedures and meth-
odologies for issuing ratings on securities or 
money market instruments. 
‘‘(B) CONSIDERATION OF EVIDENCE.—Per-
formance measures the Commission may con-
sider 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) include the transition and 
default rates of its in discrete asset classes.’’. 
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SEC. 102. GENERAL ACCOUNTABILITY OFFICE STUDY OF 
CREDIT RATINGS. 
(a) STUDY
REQUIRED.—The Comptroller General 
shall conduct a study of the treatment of different classes 
of bonds (municipal versus corporate) by the nationally rec-
ognized statistical rating organizations. Such study shall 
examine— 
(1) whether there are fundamental differences in 
the treatment of different classes of bonds by such rat-
ing organizations that cause some classes of bonds to 
suffer from undue discrimination; 
(2) if there are such differences, what are the 
causes of such differences and how can they be allevi-
ated; 
(3) whether there are factors other than risk of 
loss that are appropriate for the credit ratings agen-
cies to consider when rating bonds, and do those fac-
tors vary across different sectors; 
(4) the types of financing arrangement used by 
municipal issuers; 
(5) the differing legal and regulatory regimes 
governing disclosures for corporate bonds and munic-
ipal bonds; 
(6) the extent to which retail investors could be 
disadvantaged by a single ratings scale; and 
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(7) practices, policies, and methodologies by the 
nationally recognized statistical rating organizations 
with respect to rating municipal bonds. 
(b) REPORT REQUIRED.—Within 6 months after the 
date of enactment of this Act, the Comptroller General shall 
submit a report on the results of the study required by sub-
section (a) to the Committee on Financial Services of the 
House of Representatives and the Committee on Banking, 
Housing, and Urban Development of the Senate. Such re-
port shall include an assessment of each of the issues and 
subjects described in paragraphs (1) through (7) of sub-
section (a). 
SEC. 103. IMPLEMENTATION. 
The Securities and Exchange Commission shall pre-
scribe rules to implement the amendments made by section 
101 within 270 days after the date of enactment of this Act. 
TITLE II—REVIEW OF MUNICIPAL 
BOND INSURANCE INDUSTRY 
SEC. 201. AUTHORITY OF SECRETARY. 
(a) AUTHORITY TO RECEIVE AND COLLECT INFORMA-
TION.—Subject to subsection (b), the Secretary of the Treas-
ury shall have the authority to receive and collect (directly 
from the States and other sources), and to analyze and dis-
seminate, data and information, and to issue reports, re-
garding entities that insure or guarantee the payment of 
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any portion of the principal and interest of any municipal 
obligation, including information, data and material re-
garding— 
(1) financial safety and soundness of such enti-
ties; 
(2) concentration of insurance liabilities of such 
entities; 
(3) performance of such entities under various 
scenarios of macro- and micro-economic stress; 
(4) underwriting standards for such entities; and 
(5) risk management of such entities. 
(b) LIMITATIONS.—With respect to the authority under 
subsection (a)— 
(1) the submission of any non-publicly available 
data and information to the Secretary shall be vol-
untary and such submission shall not constitute a 
waiver of, or otherwise affect, any privilege or con-
fidentiality protection to which the data or informa-
tion is otherwise subject; 
(2) to the extent that any such data and infor-
mation 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 
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enter into an information-sharing agreement with 
such source to provide for the receipt of such data by 
the Secretary; 
(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 
original source of any non-publicly available data or 
information and the source of such data or informa-
tion to the Secretary, regarding the privacy or con-
fidentiality of any data or information in the posses-
sion 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 data or information, shall continue to apply to 
such data or information after the data or informa-
tion has been provided pursuant to this subsection to 
the Secretary; 
(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 informa-
tion by the Secretary; 
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(5) the Secretary may not in any case disclose 
to any party any personally identifiable information 
received or collected by the Secretary pursuant to this 
subsection; and 
(6) any non-publicly available data and infor-
mation received or collected by the Secretary pursu-
ant to this subsection shall be considered trade secrets 
and commercial or financial information that is priv-
ileged and confidential pursuant to section 552(b)(4) 
of title 5, United States Code. 
SEC. 202. REPORTS TO CONGRESS. 
The Secretary shall submit a report annually to the 
Committee on Financial Services of the House of Represent-
atives 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, meaning-
ful trends in such industry, and the potential impacts on 
the overall financial system in the United States that enti-
ties providing such insurance and guarantees could have 
under various scenarios of macro- and micro-economic 
stress. 
SEC. 203. RETENTION OF EXISTING REGULATORY AUTHOR-
ITY. 
This title may not be construed to establish any super-
visory or regulatory authority of the Secretary over any en-
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tity that insures or guarantees the payment of any portion 
of the principal and interest of any municipal obligation. 
SEC. 204. DEFINITIONS. 
For purposes of this title, the following definitions 
shall apply: 
(1) MUNICIPAL OBLIGATION.—The term ‘‘munic-
ipal obligation’’ means any bond, note, security, or 
other debt obligation issued by any State, any polit-
ical subdivision of a State, one or more political sub-
divisions of a State, or a State and one or more of 
its political subdivisions, by any agency, department, 
office, authority, or other instrumentality of a State, 
any political subdivision of a State, one or more po-
litical subdivisions of a State, or a State and one or 
more of its political subdivisions, or by any other en-
tity eligible to issue bonds the interest on which is ex-
cludable from gross income under section 103 of the 
Internal Revenue Code of 1986. 
(2) POLITICAL SUBDIVISION.—The term ‘‘polit-
ical subdivision’’ includes any city, county, town, 
township, parish, village, or other general purpose po-
litical subdivision of a State and any school, utility, 
fire, or tax district, or other special purpose political 
subdivision of a State. 
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