The House Financial Services Committee has again postponed voting on whether to require credit rating agencies to rate municipal bonds, Treasuries, and corporate debt on the same scale, based on likelihood of repayment. The delay may be due to House consideration of fallout from the ongoing mortgage crisis.
A knowledgeable source yesterday said the committee has been focusing its attention on recent Fannie Mae and Freddie Mac troubles, leaving less time for the ratings bill, which was scheduled for a tentative vote today.
The bill put forward by committee chairman Rep. Barney Frank, D-Mass., would do away with a system Frank deemed unfair, in which high-quality munis can be rated lower than corporate bonds with similar or higher default risk.
State and local finance groups said in a June letter that the legislation "will lower borrowing costs and make it easier for new investors to participate in the municipal securities market."
The bill also orders an investigation of the municipal bond insurance industry, following widespread downgrades of major insurers. Frank has called municipal bond insurance an unnecessary and detrimental burden on muni issuers.
Frank last month introduced his bill with three Democratic co-sponsors. A committee vote planned for shortly after introduction was postponed until this month. Republicans requested the previous delay, according to a knowledgeable source.
Frank yesterday announced the latest postponement "to a later date and time."