One of the reasons I write for HousingWire
is to bring the data-based insights of asset-backed research into the public babelogue over the causes and cures of the financial crisis. A chore I thought was needful, as it appears to me—from media coverage, loads of testimony delivered to Congress, and pontifications of elected representatives and government officials—that everyone blames securitization in whole or part, but few are circulating facts. By and large, they haven’t got a clue.
Most perplexing to me, having worked since the mid-90s with rich loan level data available for private MBS, are assertions that the market did not have enough information about the characteristics of the loans being securitized to make informed decisions. That mistake appears to be most recently incarnated in campaigns to enhance the disclosure provided for securities at the time of offering and ongoing over the life of the transaction.
The Federal Deposit Insurance Corporation
(FDIC) surged onto the field late last year with a proposed securitization rule for insured depository institutions (IDI) that includes a disclosure component. It has been marketed by its authors as a necessary step to restart private securitization of home mortgages and greeted in the blogosphere as a bold step forward for transparency. In addition, the Securities and Exchange Commission
(SEC), whose statutory responsibility it is to set disclosure requirements for primary and secondary market issues, has been reviewing its regulation of ABS securitization and is on the verge of releasing proposed new rules.
I disagree with the brouhaha over disclosure. I think the FDIC is out of its element, and the SEC’s efforts are misaimed, however necessary politically. Mine are not popular views outside the bank huddle (to which I also don’t subscribe), so let’s sort this month’s Kitchen Sink before some pundito tries to switch on the garbage disposal.
Doth the FDIC Dis Reg AB? What can an issuer not know, or not have access to, that is material? And which MBS market does the FDIC and its pals want to revive? Alt-A? Subprime? Nontraditional loans like Option ARMs or interest-only fixed?
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