An important conversation began last year in the Washington regulatory community, led by the Federal Deposit Insurance Corp., about how to repair the market for bank securitizations, especially residential mortgages. Unfortunately a number of banks and trade associations are trying to derail the FDIC initiative.
In 2000, after the Enron collapse, the FDIC clarified the scope of its statutory authority as conservator or receiver of a failed bank to disaffirm or repudiate contracts with respect to off-balance-sheet entities. Now the accounting rules have changed, again, and the FDIC is likewise amending its regulations. The 2009 accounting rule changes affect whether an OBS entity must be consolidated under GAAP.