After the Great Recession, US regulators attempted to prevent another credit crisis by enacting the Dodd-Frank Act, which included a requirement that mortgage originators hold at least 5% of an initiated mortgage security on their own books. Senior financial expert Robert C. Pozen discusses a recent ruling that invalidates the 5% provision for some participants and argues that the change, along with the easing of other controls, could pose immense future risk to the financial system. getAbstract recommends this concise and informative report to financial professionals.
In this summary, you will learn
- What the 5% "skin in the game" regulation entails,
- Why its rollback could harm financial markets and
- What less restrictive mortgage governance means for the financial system.
About the Author
Robert C. Pozen, a senior fellow at the Brookings Institution, was formerly executive chairman of MFS Investment Management.