Wednesday, October 29, 2008

Securitization - Goodbye

Interesting article talking about some changes in accounting rules for banks. I am all for these rules. They should have happened a long time ago. I am concerned that passing it now would not be a good thing. It is essentially changing the rules kicking them while they are down in the middle of the game, i.e. what the SEC did to hedge funds in September with the no shorting rules. The article says it is open for public comment for this year. Maybe my accounting friends can tell me what the probabilities of something like this passing at this point in time? How close or far is FASB from getting this done?

This should have happened a long time ago....hello Enron

One rule change, to FAS 140, is the proposed elimination of qualified special-purpose entities, which provide a way for banks to keep securitized assets off their balance sheets.

Would have been good also

Changes to the second rule, FIN 46(R), would provide new, more stringent criteria for when banks are allowed to transfer ownership of securitized assets and liabilities.
FASB issued a draft of the proposed rule changes last month, and they are out for public comment until year-end.


According to a report released last week by research firm TowerGroup, the changes could hit banks for more than $60 billion a year at the bottom line, which in effect would freeze the securitization market.

Now this would be horrible. Haha.

Banks and companies that use securitization as a form of financing are worried that the market may fizzle out.

The new disclosure rules would likely take effect in January 2009.

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