Uniform Treatment of NRSROs Act (Cong. Rec., Sept. 21, 2020)
Summary
Page H4602 of the House section of the Congressional Record for September 21, 2020, from debate on H.R. 5322, the Uniform Treatment of NRSROs Act. A speaker thanks the Chairwoman and Ranking Member and urges support, saying the Federal Reserve's lending facilities required ratings from a specific category of credit rating agencies, an obstacle for issuers that was not Congress's intent and that opening up eligible agencies helps small and mid-sized businesses reach capital markets, which is that speaker's view. Bill text requires disclosure of the reasoning for an exclusion and a GAO study, and a statement cites a Treasury strategy on terrorist and illicit finance.
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“Uniform Treatment of NRSROs Act (Cong. Rec., Sept. 21, 2020).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/crec-crec-2020-09-21-crec-2020-09-21-pt1-pgh4602-fb1465f4ef/
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H4602 CONGRESSIONAL RECORD — HOUSE September 21, 2020
WATERS and Ranking Member from the application of paragraph (1) pursu- rating be issued by a specific credit
MCHENRY and the other members of the ant to subparagraph (A), the Secretary or rating agency or has required that the
committee. Board of Governors, as applicable, shall, as rating be from a specific category of
soon as practicable after such exclusion, dis- NRSROs, such as the so-called major
Mr. Speaker, I urge Members to sup-
close to the public the reasoning for such ex-
port H.R. 5322, and I yield back the bal- clusion.
NRSROs.
ance of my time. ‘‘(3) NATIONALLY RECOGNIZED STATISTICAL
Often, these categories are self-cre-
The SPEAKER pro tempore. The RATING ORGANIZATION.—In this subsection, ated by the Federal Reserve and have
question is on the motion offered by the term ‘nationally recognized statistical been undefined and unclear to issuers.
the gentleman from California (Mr. rating organization’ has the meaning given These requirements act as an obstacle
SHERMAN) that the House suspend the that term under section 3 of the Securities between issuers and these lending fa-
rules and pass the bill, H.R. 5322, as Exchange Act of 1934 (15 U.S.C. 78c).’’. cilities. This clearly was not Congress’
(b) GAO STUDY.— intent, as it goes against Dodd-Frank,
amended.
(1) STUDY.—The Comptroller General of the which mandates that we foster com-
The question was taken; and (two- United States shall carry out a study on—
thirds being in the affirmative) the petition among NRSROs rather than
(A) the quality of credit ratings across na-
rules were suspended and the bill, as trying to make sure that companies
tionally recognized statistical ratings orga-
amended, was passed. nizations (as defined under section 3 of the rely only on an oligarchy of three
A motion to reconsider was laid on Securities Exchange Act of 1934), including NRSROs.
the table. during the 2008 economic crisis; As chair of the Subcommittee on In-
(B) the effect of competition on the quality vestor Protection, Entrepreneurship,
f and Capital Markets, I am quite famil-
of credit ratings and on the ability of small-
b 1615 and mid-size companies and financial insti- iar with the work that has been done in
tutions to access the capital markets; and the last decade to end overreliance on
UNIFORM TREATMENT OF NRSROS (C) the implementation of the amendment
ACT the big three credit agencies, which led
made by subsection (a). us into the 2008 crisis. It is those big
Mr. SHERMAN. Mr. Speaker, I move (2) REPORT.—Not later than one year after three that gave AAA ratings to Alt-A
to suspend the rules and pass the bill the date of enactment of this Act, the Comp-
troller General shall issue a report to the
lendings, which I believe is what
(H.R. 6934) to amend the CARES Act to caused the 2008 crisis.
Congress containing all finding and deter-
require the uniform treatment of na- minations made in carrying out the study re- Decisions by the Fed and Treasury
tionally recognized statistical rating quired under paragraph (1). with respect to many lending facilities
organizations under certain programs have threatened to undo our work to
The SPEAKER pro tempore. Pursu-
carried out in response to the COVID– try to diversify the availability of dif-
ant to the rule, the gentleman from
19 emergency, and for other purposes, ferent NRSROs.
California (Mr. SHERMAN) and the gen- H.R. 6934, which is limited to facili-
as amended.
tleman from South Carolina (Mr. ties which have been stood up in re-
The Clerk read the title of the bill.
TIMMONS) each will control 20 minutes. sponse to the COVID–19 pandemic, will
The text of the bill is as follows:
The Chair recognizes the gentleman set clear credit rating standards for
H.R. 6934 from California.
Be it enacted by the Senate and House of Rep- both the Federal Reserve and its
GENERAL LEAVE issuers. It also clarifies Congress’ in-
resentatives of the United States of America in
Congress assembled, Mr. SHERMAN. Mr. Speaker, I ask tent and will ensure that its legislative
SECTION 1. SHORT TITLE. unanimous consent that all Members objectives are carried out at the agen-
This Act may be cited as the ‘‘Uniform have 5 legislative days within which to cy level.
Treatment of NRSROs Act’’. revise and extend their remarks on this Most importantly, however, the leg-
SEC. 2. UNIFORM TREATMENT OF NRSROS. legislation and to insert extraneous islation will result in more issuers hav-
(a) IN GENERAL.—Section 4003 of the material thereon. ing access to these lending facilities,
CARES Act (15 U.S.C. 9042), as amended by The SPEAKER pro tempore. Is there an important objective during this pan-
section 902, is further amended by adding at objection to the request of the gen- demic and economic downturn, while it
the end the following: tleman from California? will still ensure that there are stand-
‘‘(m) UNIFORM TREATMENT OF NRSROS.— There was no objection. ards in effect that will adequately pro-
‘‘(1) IN GENERAL.—If, in carrying out this Mr. SHERMAN. Mr. Speaker, I yield tect the facility and the interests of
section or any other program making use of the taxpayer.
myself as much time as I may con-
a facility established under section 13(3) of Mr. Speaker, I greatly appreciate
the Federal Reserve Act in response to the sume.
COVID–19 emergency, the Secretary of the Mr. Speaker, I rise in support of H.R. Congresswoman DEAN’s leadership in
Treasury or the Board of Governors of the 6934, the Uniform Treatment of bringing forth this important legisla-
Federal Reserve System establishes a re- NRSROs, which is sponsored by Con- tion, and I reserve the balance of my
quirement for an entity, security, or other gresswoman DEAN from Pennsylvania. time.
instrument to carry a minimum credit rat- This important legislation from Con- Mr. TIMMONS. Mr. Speaker, I yield
ing, the Secretary or the Board of Governors gresswoman DEAN will ensure that myself such time as I may consume.
shall accept credit ratings provided by any qualified issuers have fair access to Mr. Speaker, I would like to thank
nationally recognized statistical rating orga-
lending facilities, and it will ensure the gentlewoman from Pennsylvania
nization with respect to such entity, secu- (Ms. DEAN) for introducing this bipar-
rity, or other instrument, if the nationally that these facilities are granted on
tisan bill.
recognized statistical rating organization is clear terms. Since the early days of the pandemic,
registered with the Securities and Exchange This is not a time where agencies the Federal Reserve has acted swiftly
Commission to issue credit ratings with re- such as the Federal Reserve should just to ensure liquidity is available to com-
spect to the applicable asset class of the en- make it up as they go along, especially
tity, security, or other instrument. panies of all sizes across the country.
when these policies disproportionately The emergency facilities support busi-
‘‘(2) EXCEPTION.— harm small and mid-sized companies.
‘‘(A) IN GENERAL.—The Secretary or the nesses and, in turn, their workers and
Board of Governors may exclude a nationally
Thus, my colleague, Ms. DEAN, intro- customers.
recognized statistical rating organization duced, and I was pleased to cosponsor, The committee has continually
from the application of paragraph (1) if, in legislation to provide clarity in the called for a broad-based approach to
consultation with the Securities and Ex- lending process by ensuring that na- aid our businesses and communities
change Commission, the Secretary or Board tionally recognized statistical rating throughout this economic crisis. H.R.
of Governors, as applicable, determines that organizations, also referred to as 6934 simply encourages the Federal Re-
the nationally recognized statistical rating NRSROs, are treated uniformly. serve to include companies that have
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organization is unable to provide reliable More specifically, the Federal Re-
and accurate ratings for a particular asset
credit ratings from all SEC-registered
serve and Treasury often require a and supervised NRSROs as participants
class and that such exclusion is in the public
interest. credit rating to apply for participation in its emergency facilities.
‘‘(B) REPORT.—If the Secretary or the in a lending facility. When there is Though the Federal Reserve revised
Board of Governors excludes a nationally such a requirement, the Federal Re- some of the requirements for compa-
recognized statistical rating organization serve has, at times, required that the nies with credit ratings from smaller
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September 21, 2020 CONGRESSIONAL RECORD — HOUSE H4603
NRSROs, there are still companies left cess, transparency, and healthy com- Financing’’ concludes, ‘‘While money laun-
on the sidelines. This bill will ensure petition, without compromising qual- dering, terrorism financing, and WMD pro-
small and mid-sized businesses have ac- ity, at a time when it is needed most. liferation financing differ qualitatively and
quantitatively, the illicit actors engaging in
cess to the facilities that provide nec- Mr. Speaker, I thank Chairwoman these activities can exploit the same
essary support. WATERS, the Financial Services Com- vulnerabilities and financial channels.’’.
An open and transparent process is mittee staff, and, importantly, my Re- (3) Among those are bad actors engaged in
essential to the success of the emer- publican colead, Representative ANDY trafficking, whether they trade in drugs,
gency facilities. This bill supports that BARR, for their work on this legislation arms, cultural property, wildlife, natural re-
process. to help struggling businesses get the sources, counterfeit goods, organs, or, even,
Mr. Speaker, I urge my colleagues to capital they need. other humans.
support the bill, and I reserve the bal- (4) Their illegal (or ‘‘dark’’) markets use
Mr. Speaker, I urge my colleagues to
similar and sometimes related or overlap-
ance of my time. support this legislation. ping methods and means to acquire, move,
Mr. SHERMAN. Mr. Speaker, I yield Mr. TIMMONS. Mr. Speaker, I am and profit from their crimes.
3 minutes to the gentlewoman from prepared to close. (5) In a March 2017, report from Global Fi-
Pennsylvania (Ms. DEAN), the author of I would simply urge my colleagues to nancial Integrity, ‘‘Transnational Crime and
this legislation. support H.R. 6934, and I yield back the the Developing World’’, the global business
Ms. DEAN. Mr. Speaker, I thank my balance of my time. of transnational crime was valued at $1.6
colleague and friend and chair for Mr. SHERMAN. Mr. Speaker, I yield trillion to $2.2 trillion annually, resulting in
yielding, and I thank my colleague on myself the balance of my time. crime, violence, terrorism, instability, cor-
the other side of the aisle for his sup- ruption, and lost tax revenues worldwide.
Mr. Speaker, I again would like to
SEC. 3. GAO STUDY.
port for this bill. thank my colleague from Pennsylvania (a) STUDY.—The Comptroller General of
Mr. Speaker, I rise in support of H.R. (Ms. DEAN) for introducing, supporting, the United States shall carry out a study
6934, the Uniform Treatment of and, in effect, passing this legislation on—
NRSROs Act. here today. It will help qualified (1) the major trafficking routes used by
NRSROs are nationally recognized issuers have access to lending facili- transnational criminal organizations, terror-
statistical rating agencies. This is a bi- ties; it will ensure that that access to ists, and others, and to what extent the traf-
partisan bill that addresses businesses’ facilities is granted on terms that are ficking routes for people (including chil-
need for greater access to Federal lend- dren), drugs, weapons, cash, child sexual ex-
clear; and it will ensure that Congress’
ploitation materials, or other illicit goods
ing facilities in the time of COVID and legislative intent is carried out and is are similar, related, or cooperative;
a uniform treatment of credit rating consistent with the policy of Congress (2) commonly used methods to launder and
agencies in the application process for that we have focused on in the Investor move the proceeds of trafficking;
these much-needed loans. Protection, Entrepreneurship, and Cap- (3) the types of suspicious financial activ-
In response to the economic crisis re- ital Markets Subcommittee to make ity that are associated with illicit traf-
sulting from the COVID–19 pandemic, sure that we are not overly reliant on ficking networks, and how financial institu-
several lending facilities have been cre- just three credit rating agencies. tions identify and report such activity;
ated to assist struggling businesses at (4) the nexus between the identities and fi-
Mr. Speaker, I yield back the balance
this difficult time. The Federal Re- nances of trafficked persons and fraud;
of my time. (5) the tools, guidance, training, partner-
serve and Treasury, however, have lim- The SPEAKER pro tempore. The ships, supervision, or other mechanisms that
ited access to these facilities to busi- question is on the motion offered by Federal agencies, including the Department
nesses whose assets have been rated by the gentleman from California (Mr. of the Treasury’s Financial Crimes Enforce-
only a select few credit rating agen- SHERMAN) that the House suspend the ment Network, the Federal financial regu-
cies, making it unnecessarily difficult rules and pass the bill, H.R. 6934, as lators, and law enforcement, provide to help
for many businesses to access much- amended. financial institutions identify techniques
needed resources. The question was taken; and (two- and patterns of transactions that may in-
In Pennsylvania alone, several small volve the proceeds of trafficking;
thirds being in the affirmative) the (6) what steps financial institutions are
and mid-sized companies as well as mu- rules were suspended and the bill, as taking to detect and prevent bad actors who
nicipal bond issuers have been excluded amended, was passed. are laundering the proceeds of illicit traf-
from the facilities or have their ratings A motion to reconsider was laid on ficking, including data analysis, policies,
from nonapproved rating agencies the table. training procedures, rules, and guidance;
called into question by the market. f (7) what role gatekeepers, such as lawyers,
This legislation seeks to remove notaries, accountants, investment advisors,
these barriers by amending the CARES STOPPING TRAFFICKING, ILLICIT logistics agents, and trust and company
Act to require that the Federal Reserve FLOWS, LAUNDERING, AND EX- service providers, play in facilitating traf-
PLOITATION ACT OF 2020 ficking networks and the laundering of il-
and Treasury accept ratings from any
licit proceeds; and
nationally recognized statistical rating Mr. SHERMAN. Mr. Speaker, I move (8) the role that emerging technologies, in-
organization, or NRSRO. This would to suspend the rules and pass the bill cluding artificial intelligence, digital iden-
have the effect of opening up access to (H.R. 7592) to require the Comptroller tity technologies, blockchain technologies,
the facilities to issuers with a rating General of the United States to carry virtual assets, and related exchanges and on-
from any duly recognized NRSRO that out a study on trafficking, and for line marketplaces, and other innovative
has been approved in the relevant asset other purposes. technologies, can play in both assisting with
class by the SEC. The Clerk read the title of the bill. and potentially enabling the laundering of
This legislation would also require proceeds from trafficking.
The text of the bill is as follows: (b) CONSULTATION.—In carrying out the
the Comptroller General to issue, with- H.R. 7592 study required under subsection (a), the
in 1 year of enactment, a study on the Be it enacted by the Senate and House of Rep- Comptroller General shall solicit feedback
quality of credit rating agencies across resentatives of the United States of America in and perspectives to the extent practicable
NRSROs, including during the 2008 cri- Congress assembled, from survivor and victim advocacy organiza-
sis. The study would also explore the SECTION 1. SHORT TITLE. tions, law enforcement, research organiza-
effect of competition on the quality of This Act may be cited as the ‘‘Stopping tions, private-sector organizations (includ-
Trafficking, Illicit Flows, Laundering, and ing financial institutions and data and tech-
credit ratings and on the ability of nology companies), and any other organiza-
small and mid-sized companies and fi- Exploitation Act of 2020’’ or the ‘‘STIFLE
tion or entity that the Comptroller General
nancial institutions to access the cap- Act of 2020’’.
determines appropriate.
SEC. 2. FINDINGS. (c) REPORT.—The Comptroller General
ital markets.
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At a time of unprecedented economic The Congress finds the following: shall issue one or more reports to the Con-
(1) Trafficking is a national-security gress containing the results of the study re-
uncertainty, we need to make sure that
threat and an economic drain of our re- quired under subsection (a). The first report
small and mid-sized businesses have ac- sources. shall be issued not later than the end of the
cess to capital markets needed to sur- (2) As the U.S. Department of the Treas- 15-month period beginning on the date of the
vive and recover. By expanding eligible ury’s recently released ‘‘2020 National Strat- enactment of this Act. The reports shall con-
NRSROs, this legislation opens up ac- egy for Combating Terrorist and Other Illicit tain—
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