President Obama's Regulatory Reform Proposal: No Surprises for the Securitization Industry
The Obama Administration’s proposed regulatory reform has been called by the Wall Street Journal “the most sweeping overhaul of the way the U.S. government oversees financial markets since the 1930s.” Controversy surrounds a number of elements of the broad proposal, a copy of which may be found here, notably the proposal’s plan to increase the Federal Reserve Board’s role in regulating any large financial institution whose combination of size, leverage and intercon¬nectedness to other financial institutions could pose a threat to financial stability if it failed. This supervision would extend to foreign parents and subsidiaries regardless of whether those entities are currently subject to regulation by authorities in the United States. Another controversial provision of the proposal is the creation of the Consumer Financial Protection Agency, whose mission includes encouraging the offering of “plain vanilla” products and banning or restricting “yield spread premiums,” prepayment penalties and other practices thought to be unfair to unsophisticated consumers. For the most part, however, the elements of the proposal that touch on the securitization market incorporate concepts already being discussed among market participants, which suggests that the securitization market is moving in the right direction with those policies it proactively has taken under review.
