US regulators to review off-balance packaged loans

The US regulators want to alter the rules associated with specially packaged
loans following the market turmoil related to subprime credit.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke
are waiting for the markets to stabilise, before they look to alter the rules
associated with loan securitizations which resulted in $146m in losses for

‘We’re looking at off-balance-sheet contingent liabilities. We’re looking at
accounting and valuation issues. We’re looking at the rating agencies,’ said

The securities were given top-end credit ratings, reducing the need for
investors to scrutinize the quality of assets on which the credit was based.

Securities and Exchange Commission chairman Christopher Cox – who with
Paulson and Bernanke, were scheduled to testify before the Senate Banking
Committee in Washington on the economy and financial markets – said he planned
to discuss accounting issues at the hearing, including difficulties valuing
thinly traded securities backed by subprime mortgages.

The SEC has so far begun about three dozen
investigations into whether companies, including lenders, underwriters and
consulting firms, violated securities laws during the subprime boom and the
market’s subsequent collapse.

Further reading:

Senator asks standard setters for early subprime

Credit crunch sparks corporate fraud fear

Lenders ‘stretched’ rules to get risk off-balance-sheet

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