Recent U.S. Financial Reforms Affecting Structured
Finance: Missing the Mark or Too Soon to Tell?

Abstract

This article reviews several provisions of the recently-enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) and seeks to assess their likely effect thereof on structured finance. The authors review the provisions contained in Title VII [Wall Street Transparency and Accountability Act regulating the over-thecounter (OTC) swaps markets]; Subtitles C (Improvements to the Regulation of the Credit Rating Agencies) and D (Improvements to the Asset-Backed Securitization Process) of Title IX (Investor Protection and Securities Reform Act of 2010); and Title XIV (Mortgage Reform and Anti- Predatory Lending Act) of the Dodd-Frank Act as the effects of these reforms will be intrusive into many key areas of structured finance. Moreover, the exact nature and degree of the effects have to be established in over 300 mandated regulatory rulemakings, studies and reports in a relatively short period with an uncertain degree of effective coordination among the many regulatory agencies involved. Notwithstanding the Dodd-Frank Act’s numerous required rulemakings and the limitation on the authors’ discussion due to possible changes that result from such rulemaking, this initial and preliminary review should still be instructive to readers if for no other reason than to inform those potentially affected by the related reforms so that they will be prepared to participate in the related rulemakings and minimize the risk of further unintended consequences of the Dodd- Frank Act. Readers will judge for themselves whether the reforms are sufficient to address the causes of the recent financial crisis so as to avoid its repetition or whether this intrusion will fail to obtain the benefits for the considerable cost likely to be involved under the reforms.

TOPICS: Legal and regulatory issues for structured finance, legal/regulatory/public policy