Financial Reform Watch

Published — June 2, 2011 Updated — May 19, 2014 at 12:19 pm ET

Reform reading: Mortgage risk rule creates “unholy alliance” of lobbyists

Mark Lennihan/AP

Goldman subpoenaed, Wall Street pleads for derivatives delay


A daily round-up of news analyses and stories related to the Dodd-Frank financial reform law

Mortgage risk rules – Banking regulators’ proposed risk retention rule for mortgage-backed securities have made unlikely allies of civil rights groups and banking lobbyists, who say that the tighter lending standards would deny working-class and minority Americans access to home loans, The New York Times reports.

Regulators have proposed requiring sellers of mortgage-backed securities to keep at least 5 percent of the loans on their books, except for less-risky mortgages in which the home buyer makes a 20 percent down payment. One unnamed agency lawyer referred to the coalition of consumer and banking groups as “the unholy alliance.”

June 10 is the deadline for public comments on the proposed rule, which is posted here.

Goldman Sachs subpoenaed – Goldman Sachs Group Inc. shares dropped 2% on Thursday morning after news broke that the Manhattan District Attorney’s office subpoenaed the bank. Spurred by the recent findings of U.S. Sen. Carl Levin’s investigations subcommittee, New York prosecutors are examining the bank’s role in the global financial crisis, an unnamed source told The Associated Press.

In April, Levin’s financial crisis inquiry found examples of greedy bankers deliberately packaging and selling lousy mortgage loans. Investigators were especially critical of Goldman Sachs, which in 2007 began betting billions of dollars that the subprime market was going to deteriorate while continuing to sell subprime assets to its customers.

Derivatives rules do-over – Several major securities and financial industry groups asked U.S. regulators to start over with derivatives rules, and prepare new proposed rules that would give Wall Street more time to examine them. The U.S. Chamber of Commerce, Securities Industry and Financial markets Association (SIFMA) and others urged the delay in letters sent to the Commodity Futures Trading Commission and the Securities and Exchange Commission, according to a Bloomberg report.

Under the Dodd-Frank law, the CFTC and SEC are required to write regulations to curb risk in the trillion-dollar swaps market. JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. are among the top over-the-counter derivatives traders.

Read more in Inequality, Opportunity and Poverty

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