The American Securitization Forum (ASF) said today that the new derivative rules under the Dodd-Frank Act would keep banking institutions from investing in securitizations.
The new derivative rules would allow the Commodity Futures Trading Commission (CFTC) to make the distinction that securitizations that use plain vanilla currency would be classified as a commodity pool operator.
In a letter addressed to the CFTC, the securitization trade industry group makes the case for clear exclusion for ABS from being classified as commodity pool operators because under the Volcker Rule, the section of the Dodd-Frank Act restricting banks from proprietary trading, banks are prohibited from entering into or investing in commodity pools.
“Although the ASF supports appropriate reforms within the over-the-counter derivatives market as it relates to the securitization market, the ASF strongly believes that Congressional intent was not to rope standard ABS into the same regulatory pen as commodity pools,” said Tom Deutsch, executive director of the ASF in a press release on Friday. “An overreaching application of CFTC rules to securitizations that provide hundreds of billions of dollars in end user and consumer financing would have serious adverse effects for the economy as a whole.”