• 17 Jun 2009 at 5:33 PM

The Administration’s Arbitrary ABS Regulatory Proposal

By Greg Michaels

ovaloff.jpgWithin the thick blanket of new regulatory proposals unveiled today was a plan that would require firms securitizing loans to retain 5% of the credit risk and prohibit hedges for that risk which would “undermine the economic tie between the originator and the issued asset-backed security”. The issue of aligning interests in ABS trades is a valid one. However, when the Fed sees zero interest for the first round of CMBS TALF loans, and the administration has paid such lip service to the need to reignite the securitization market, picking a seemingly arbitrary amount of credit risk for ABS issuers to retain is a confusing first step at best.
Wall Street Calls Obama’s Mortgage-Market Debt Plan a Burden [Bloomberg]

Comments (11)

  1. 1
    Posted by guest | June 17, 2009 at 5:46 PM

    Who and how are they going to decide what comprises that 5%? 5% pro-rata among all securitizations/sales? 5% of the worst crap? WTF this is retarded

  2. 2
    Posted by guest | June 17, 2009 at 5:48 PM

    Shut up, Greg.

  3. 3
    Posted by guest | June 17, 2009 at 5:53 PM

    Greg,
    There’s an horrendous glut of CRE. Going to get worse. Want to get burned?

  4. 4
    Posted by guest | June 17, 2009 at 5:58 PM

    throwing darts?

  5. 5
    Posted by guest | June 17, 2009 at 6:08 PM

    @3 – The CRE market will not crash
    -GGP

  6. 6
    Posted by guest | June 17, 2009 at 6:16 PM

    I bet Greg is having fun with all of us posting such trash.

  7. 7
    Posted by guest | June 17, 2009 at 6:21 PM

    Sounds like they’re using the GSE loss-sharing provisions as a model. GSE-correspondent CMBS have held up remarkably well.
    Non-recourse (carve-outs) + seller/servicer loss sharing probably has a bit to do with that.

  8. 8
    Posted by guest | June 17, 2009 at 6:35 PM

    This might be a first: Greg posting something reasonably intelligent.
    Yes, if this was a good idea it should probably be 10% or more, but it isn’t that good an idea. The worst offenders, at least if you exclude the shell corp. orginators, all held more than 5%. They just held the highest yield, most toxic stuff so they could inflate short term earnings to increase their own payouts.

  9. 9
    Posted by guest | June 17, 2009 at 7:02 PM

    You think you’re pretty smart, don’t you, Trebek? What with your Dego mustache and your greasy hair!
    Suck it, Trebek.

  10. 10
    Posted by guest | June 17, 2009 at 10:25 PM

    I-banks always kept 3% on their books look what good it did. Major f–k-up here for us to see such a miniscule #.

  11. 11
    Posted by guest | June 18, 2009 at 8:30 AM

    But Fitch’s says it’s okay to keep all these CMBS deals AAA so it’s all good right?
    I mean, pssh, AAA means it’s as good as a T-Bill, doesn’t it?
    No AAA deal has ever gone bad, has it?

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