The US government on Tuesday sent the Congress a legislation seeking to tighten oversight of Wall Street's credit rating agencies.

The plan, proposed by the Treasury Department aims to better protect investors, also seeks to reduce reliance on an industry widely criticized for failing to give investors adequate warning of the risks in subprime mortgage securities that triggered the financial crisis.

As the latest part in a series measures of the Obama administration's sweeping plan for overhauling the US financial rule system to help

avert another meltdown, the proposal is meant to bring greater transparency to the rating agencies and would bolster the authority of the Securities and Exchange Commission (SEC) over them.

Investor advocates and other critics maintain that conflicts of interest can arise under the current system when companies that issue securities--as opposed to investors-- pay the agencies for ratings.

Several lawmakers also have proposed stiffer federal supervision of the US$5 billion-a-year industry dominated by Standard & Poor's, Moody's Investors Service and Fitch Ratings.

The agencies are crucial financial gatekeepers, issuing ratings on the credit worthiness of public companies and securities. Their grades can be key factors in determining a company's ability to raise or borrow money, and at what cost, and which securities will be purchased by banks, mutual funds, state pension funds or local governments.

According to the Treasury Department statement, in response to the credit market turmoil, in February the SEC adopted several measures to increase the transparency of the rating agencies' methodologies, strengthen disclosure of ratings performance, prohibit certain practices that create conflicts of interest, and enhance record keeping and reporting obligations to assist the SEC in performing its regulatory and oversight functions. The SEC has allocated resources to establish a branch of examiners dedicated specifically to conducting examination oversight of rating agencies.

(Xinhua News Agency July 22, 2009)