WASHINGTON (7/13/09)--Congressman Keith Ellison this week introduced legislation that would seek to strengthen and reform the “wholly inadequate” regulation and oversight of credit rating agencies. According to a release, Ellison’s legislation, H.R. 3128, would 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. This authority would extend beyond the Feds current administrative powers under the Term Asset-Backed Securities Loan Facility to cover all types of asset-backed securities. The Securities and Exchange Commission is currently tasked with performing some oversight of credit ratings agencies. Citing instances where credit ratings agencies “have given top ratings to products backed by dubious mortgages and other loans,” Ellison said that the approval that these agencies give to a given product may be conferring a “legitimacy” that does not exist. Further, current law gives no governmental organization the power to ensure that credit rating agencies are “making reasonable assumptions” or that they have “a basic understanding” of the risks that they are assessing, Ellison added. Subjecting credit rating agencies to “enhanced supervision” by a regulator with “relevant expertise” would provide a “sensible guard rail for our financial system,” Ellison said. Ellison's bill was awaiting action from the House Financial Services Committee at press time.