A U.S. House panel approved a measure to repeal a section of theDodd-Frank Act blamed for freezing the asset-backed securitiesmarket last year.

The House Financial Services Committee approved the bill 31-19over the opposition of the senior Democrat on the panel.

The measure “provides certainty for the asset-backed securitiesmarket,” said Representative Steve Stivers, an Ohio Republican whosponsored the bill that would remove a so-called “expert liability”requirement in the regulatory law.

The credit-rating change forced “the complete shut down” of theU.S. securitization market after Dodd-Frank was signed into lawlast year by President Barack Obama because firms didn't consent tohave their ratings in prospectuses, Tom Deutsch, the executivedirector of the American Securitization Forum, said incongressional testimony in May.

To restore activity in the market, the Securities and ExchangeCommission issued two “no-action” letters allowing issuers ofasset-backed bonds to omit credit ratings.

The bill would remove a provision in Dodd-Frank that subjectsfirms such as Moody's Investors Service, Standard & Poor's andFitch Ratings to expert liability, meaning they face the same legalrisks as accountants and other parties that participate in bondsales.

Credit-rating firms were targeted by lawmakers after they issuedtop rankings to mortgage-backed securities whose collapse helpedspark the financial crisis.

'Wrong-headed'
“Sending the message herethat we want to cut back some of the liability of rating agenciesis absolutely as wrong-headed as we could be,” said RepresentativeBarney Frank, the Financial Services Committee's seniorDemocrat.

In separate action, the committee also approved a bill torequire the Federal Deposit Insurance Corp.'s inspector general toconduct a study into the agency's practices and procedures inresolving failed banks.

The measure would require an examination of the FDIC's use ofloss-sharing agreements to attract buyers for failed bank assets.In those agreements, the FDIC agrees to bear a portion of anylosses on the assets. The study would also have to contain detailsof the agency's dealings with private-equity firms looking topurchase failed banks.

The measure would require the FDIC inspector general to workwith the Treasury Department and Federal Reserve inspectors generalon the study.

Bloomberg News

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