The House Ways and Means Committee will consider a bill Monday to tighten up the nation’s credit rating to reflect what it believes are the nation’t-inspiring signs of a financial crisis.
The bill will be a boon for the financial industry, which relies heavily on credit ratings, and the Federal Reserve, which has been struggling to find enough liquidity to keep the nation on track for its second-quarter GDP report.
It would make it easier for banks to borrow more and allow taxpayers to take on more of the risk in a potential collapse in the U.S. economy, which the Fed expects to occur in the second quarter.
“It’s a good measure of the confidence of our economic situation,” Rep. Mike Simpson, R-Idaho, told CNNMoney.
The proposal is the latest in a series of proposals that lawmakers have proposed in recent weeks, and would be the first major overhaul of the nation ‘s credit rating since it was created in 1933.
The new legislation would require the Fed to review each credit rating and update the outlook each month.
The current approach is to look at three- and five-year debt to GDP ratios, as well as credit spreads between the major credit rating agencies.
The Fed has said that the ratings are too volatile, but that they have helped the U and U.K. recover from financial crisis-hit 2008-09.