From Sen. Al Franken:

Sen. Franken proposed an amendment to create a Credit Rating Agency Board, supervised by the Securities and Exchange Commission, which would assign credit rating agencies to provide initial ratings in order to reduce conflicts of interest. This would increase competition by enabling smaller credit rating agencies to finally have an opportunity to compete against the largest three agencies.

DDay at FDL has more -- Al Franken Takes On “Too Big To Fail” Rating Agencies:

Last week, I wondered if anyone in Congress would get their act together and try to deal with the problem of the credit rating agencies as part of the Wall Street reform bill. These raters essentially sold their power to high-rate crap securities to the highest bidder among the banks, because they are hired and paid by the companies whose securities they rate. Jeff Merkley told me that “there hasn’t been enough work done on it yet to come up with a solution.”

Sen. Al Franken has quietly done the work, and come up with an amendment that would change the way the rating agencies and their issuers do business. His amendment, co-sponsored by Bill Nelson and Chuck Schumer, would set up an office inside the SEC that would assign initial rating requests to the accredited rating agencies, rather than have the issuer hire the raters. “Our amendment brings the most fundamental change to the rating agency system,” said a staff member for Senator Franken who walked me through the amendment today.

The reform, modeled after a proposal by NYU law professors Matthew Richardson and Lawrence White, plugs a hole in the Wall Street reform bill by removing the conflict of interest among the rating agencies, according to Franken. He told ABC News yesterday that “If a failing student paid their teacher to turn their F into an A, everyone would agree that what the teacher had done was unethical … But right now, investors are being sold a phony bill of goods. We need to protect consumers from the pay-to-play system that rewards Wall Street players at the expense of Main Street.” Read on...