Securities Regulation

The virtual collapse of the asset-backed securities (ABS) markets during the recent financial crisis—particularly those segments based on pooled residential and commercial mortgage loans—revealed serious problems in the securitization process. One of these prob-lems, in Congress’s view, has been overreliance by loan originators, securitizers, and investors alike on a flawed credit rating structure. Congress similarly became concerned about the risks posed to investors in another market sector that was negatively affected by the recent crisis—the municipal securities market. To address some of the factors perceived by Congress as having contributed to the problems in the securitization market—and enhance the ABS and municipal markets—the legislation contains several important re-forms, most of which must be implemented by agency rulemakings.