The Senate on Thursday voted to impose tighter regulations on credit-rating agencies, which have been criticized for misjudging the risks of debt instruments at the core of the 2008-2009 financial crisis.
The proposal would set up a government clearinghouse to assign firms like Moody's Corp, Standard & Poor's and Fitch Ratings to rate an issuer's debt.
Backers said the clearinghouse could remove the pressure on agencies to produce overly rosy ratings for the firms that currently hire them directly.
There is a staggering conflict of interest facing the credit rating industry, Democratic Senator Al Franken said on the Senate floor.
Shortly after, the Senate voted 61 to 38 to require regulators like the Federal Deposit Insurance Corp to develop their own standards of creditworthiness, rather than relying solely on credit agencies' assessments.
The clearinghouse would be mostly comprised of big investors such as pension funds and endowments that rely on the accuracy of ratings for bonds they purchase.
This week, CalPERS, the largest U.S. public pension fund, won a court ruling allowing it to proceed with a lawsuit accusing the three biggest rating agencies of assigning wildly inaccurate and unreasonably high ratings, causing $1 billion of losses. The agencies say they expect to eventually prevail on the misrepresentation claim.
The clearinghouse measure could give smaller ratings agencies a chance to challenge the dominance of the top three firms.
It passed over the objections of Democratic Senator Christopher Dodd, who is overseeing the financial rewrite. He said the idea had merit but required further study to ensure that it would not have unintended consequences across the financial industry.
(Reporting by Andy Sullivan; Editing by Andrea Ricci)