Excess is what brought about this financial crisis. The only way to curb the intemperance is through increased regulation. Right or wrong? This is the question that this month's issue of ASR grapples with. It appears that the answer is not so clear cut. Various proposals from the government, ranging from accounting rules to financial reform legislation, may have the best of intentions, but they also carry with them a host of potential new problems.

A case in point - in this month's cover story, Nora Colomer examines the Obama administration's proposals on securitization, contained in a white paper released on June 17. These propositions for reform - the most prominent of which is a rule requiring originators to retain 5% of their securitized deals - provide a solid platform for securitization, and yet, as Nora asserts, they also increase the cost of capital and threaten the ability of firms to recycle credit, defeating the very purpose that securitization serves.

Accounting rules that were formalized in June are also casting a shadow on the industry. John Hintze takes a close look at the two accounting standards, Financial Accounting Statements No. 166 and No. 167, published by the Financial Accounting Standards Board (FASB) in June, which require firms to implement new disclosures and bring most securitizations back onto their balance sheets. John details how preparing for new accounting rules is a daunting task for the firms that have to do it in short order. And that's not all. Returning securities to these companies' balance sheets could potentially burden them with more intensive capital requirements.

The CMBS market, of course, has not been spared, which has spooked players in that sector. The FASB finalized its ruling on FAS 140, which aims to prevent the abuse of special purpose entities (SPE). Although these new standards are supposed to help provide better disclosure to investors about a firm's SPE-related activities, an article by Poonka Thangavelu describes the harm in eliminating the concept of the qualifying special purpose entity, which allowed institutions to transfer assets off their books.

There's also the issue of ineffective regulation. In his column this month, Bill Berliner looks at the administration's proposal for a Consumer Financial Protection Agency. Using the failure of the recently enacted Home Valuation Code of Conduct (HVCC) as a guide, Bill explains that stronger control of the financial sector, including consumer finance, should be done via the legislative process. Implementing government programs, Bill argues, is not the job of prosecutorial bodies like the New York Attorney General, which oversees the HVCC.

In June, the administration also recommended changes to the regulation of OTC derivatives. Nora notes that there was nothing earth shattering about the white paper containing these new derivatives proposals since Treasury Secretary Timothy Geithner announced similar initiatives and objectives back in May.

On the emerging markets front, Felipe Ossa conducts a thorough Q&A with Magchiel Groot from Dutch development bank FMO. In a market still struggling to get back on its feet, the FMO is sending a clear signal of support. Don't be surprised to see more deals with their signature in the not-too-distant future.

Finally, we also address the reason why people saw a need for regulations in the first place - troubled loans that are currently in need of modification. ASR features a 1010data-sponsored panel held last month with investment professionals who offered their thoughts on various loan modification programs and what they mean for investors.

(c) 2009 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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