Trade Groups Coalesce Around Mission to Revitalize Structured Credit

Three major trade groups joined forced Monday afternoon, as part of a growing effort by Wall Street and the rest of the financial industry to ensure that securitization remains a viable option for market participants. The Securities Industry and Financial Markets Association, the American Securitization Forum, and the European Securitsation Forum said in a joint press statement yesterday that they had formed a global, joint working group that will look to “revitalize the securitization and structured credit markets.” “Examining a full range of issues related to these markets, but with a view toward specific, practical solutions that will make a long-term impact, is something that the working group is uniquely positioned to do,” said Tim Ryan, president and CEO of SIFMA. The initiative will be co-led by Sanjeev Handa, head of global public markets at TIAA-CREF, and Jeffrey Perlowitz, managing director & co-head of global securitized markets at Citigroup Inc (C). Other senior-level working group members represent a cross-section of these markets globally, and include investors, issuers, financial intermediaries and other stakeholders. The decision comes at a critical juncture for capital markets participants, having watched large chunks of the market freeze amid a historic crash in private-party mortgages and related debt structures; it also comes as the Federal Accounting Standards Board is considering a broad change in accounting rules that threatens the very existence of much of the securitization industry. FASB has said it wants to revise an accounting standard, known as FAS 140, that governs the treatment of so-called off-balance sheet entities; the revision would serve to essentially eliminate any securitization market for credit card recievables and private-party mortgages, HW’s sources have told us. Fear over what FAS 140 changes could mean for both Fannie Mae (FNM) and Freddie Mac (FRE) led to a market bludgeoning of both GSE’s share prices on Monday afternoon. “The goals of this initiative include improving the operation and function of these markets in ways that enhance market discipline and transparency, while preserving the essential role that securitization plays in funding consumer and business credit needs,” the three groups said in a joint press statement. Much of this working group’s activities are likely to take place behind the scenes, HW’s source told us Tuesday morning — but the outcome of its efforts will likely be felt by industry participants for years, one way or another. “The trillion dollar question here is: can private-party securitization be salvaged?” said one bank executive, who asked not to be named. “The answer won’t just impact financials, it will impact everyone in mortgage banking.” For more information, visit http://www.sifma.org. Disclosure: The author held no positions in C, FNM or FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.