“If everybody is playing by the same set of rules, whether you are talking about loan origination or securitization, then it becomes very hard to game the system. The lack of definitions is a huge problem… If the Congress, the SEC and the FASB, and the financial regulators only do one thing this year when it comes to reforming the world of structured credit, then it should be to impose by law and regulation common standards for the definitions used in the marketplace.”
This is the key point in a hard-hitting and wide-ranging interview with R&R’s Ann Rutledge at The Institutional Risk Analyst. Among other points, Rutledge addresses the problem of basis risk in ABS: “The cash is the best indicator of what synthetic value really is. If the cash market were visible and could be examined by all participants, then it would give away the ability of the dealer banks to tax participants in the market and extract these abnormal returns.”
Read the full article at The Institutional Risk Analyst: “Back to Basis for Securitization and Structured Credit: Interview With Ann Rutledge“
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