by Joshua Ronen and Marti Subrahmanyam
The recently proposed Senate Banking Committee bill requires ". . . any securitizer to retain an economic interest in a material portion of the credit risk for any asset that the securitizer . . . transfers, sales, or conveys to a third party" without the ability of hedging the retained interest. The retained interest is generally required to be at least 5% of the credit risk of the transferred assets with few exceptions. A somewhat similar provision is contained in the House Bill. How will this requirement affect the access to loans by consumers and investors?