Recent bank failures have cast doubt on whether existing structural mechanisms are sufficient to protect securitization transactions from the credit risk of the counterparties on which they rely. In cases where Lehman Brothers and certain Icelandic banks were a crucial counterparty, for example, existing mechanisms did not protect structured finance bondholders from downgrades and in some cases defaults.

Esoteric and off-market counterparty positions have been a feature of structured finance transactions for some time.

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