This was a vote on an amendment offered by Rep. McCarthy (R- CA) that would have removed language that was designed to strengthen the liability standards for national credit rating agencies such as Standard & Poors and Moody’s. The amendment was offered to H.R. 4173, a major financial reform bill which implemented the most significant changes in the regulation of the financial industry since The Great Depression.

Rep. McCarthy began his remarks in support the amendment by saying: “I'm not here to defend credit rating agencies. I am supportive of other credit rating agency reforms that the committee passed . . . (but) I think the government and the private sector should use credit ratings for what they are--predictive opinions about inherently uncertain futures.”

McCarthy then cautioned that: “Increased liability may lead to (the rating) agencies being hesitant to even allow their ratings on security offerings, thereby providing potential investors with less information.” He went on to argue that adding language increasing the ratings’ potential liability would force them to “practice defensive ratings for fear of being sued, (and) this would ultimately increase costs and restrict credit. Opening the ratings agencies to unlimited civil liability will not guarantee more accurate credit ratings. Litigating an industry to death does not solve any problems.”

Rep. Kilroy (D-OH) opposed the amendment. She noted that “the credit rating agencies played a huge role in the collapse of our markets a year ago. In fact, they bragged that they could rate anything, even a cow. And they continue to play a critical role in millions of financial transactions as pension funds, mutual fund managers, and others rely on the ratings from Moody's, Standard & Poor's, and Fitch as they make their investment decisions.”

Kilroy claimed that H.R. 4173, as written, “will provide for greater scrutiny and more responsibility from the credit rating agencies protecting . . . investors. But the amendment . . . would weaken credit rating agency reforms.” She noted that accountants, lawyers, investment bankers, directors, officers, and executives of the issuers are already subject to the liability that the McCarthy amendment would remove from rating agencies.

The amendment was defeated by a vote of 166-259.  One hundred and sixty-two  Republicans and four Democrats voted “aye”. Two hundred and forty-nine  Democrats and ten Republicans voted “nay”. As a result, the language strengthening liability standards for national credit rating agencies remained in the financial reform legislation.