Franken said his amendment, titled "Restore Integrity to Credit Ratings," would lay the groundwork for a new regulatory entity that would include members of the investment community and would be in charge of objectively and independently selecting the agency that provides initial ratings to newly minted securities, so as to reduce the potential for "ratings shopping" or other conflicts of interest.
"[The measure] would increase competition by enabling smaller credit rating agencies to finally have an opportunity to compete against the largest three agencies that have abused the issuer-pays model," a written summary of the Franken amendment said.
Levin, who chaired the Senate subcommittee that over the past year and a half has examined the financial crisis -- and who made considerable headlines after at times profanity-laced marathon grilling of Goldman Sachs executives last week -- has said the Senate probe found evidence, including emails, pointing to some questionable practices within the rating agencies as the credit bubble was building.
Levin primarily questioned the issuing of triple-A ratings to derivative securities, such as CDOs, that were laced with toxic subprime mortgages.
A slew of particularly damning emails sent by ratings agency executives reveal a culture in which analysts were often at odds with revenue generation agendas.
In one email from August 2004, an S&P executive asks a colleague whether the firm might discuss adjusting criteria for rating certain issuances "because of the ongoing threat of losing deals."
In another email, from April 2006, a Moody's executive laments to another he is "getting serious push back from Goldman on a deal they want to go to market with today."
"For a hundred years, Main Street investors trusted U.S. credit-rating agencies to guide them toward safe investments," Levin said in explaining why the ratings agencies were being singled out. "But now that trust has been broken."