As we noted last week, the FRB, FDIC, OCC, SEC, and CFTC have proposed a massive, controversial rewrite of the rules governing the funds which U.S. banks may own, sponsor, or otherwise affiliate.  If implemented, the proposal gives big banks far greater scope to organize funds that engage in mortgage securitization, credit-risk transfer or covered-bond issuance on their own or in concert with the GSEs or Ginnie Mae.  Together with the new FDIC safe-harbor liberalization, the Volcker rewrite could redefine U.S. secondary-market operations, reinvigorating a wide array of bank-related and even bank-guaranteed structures that would create new market outlets for non-conforming loans, compete with the GSEs, and provide new credit-enhancement incentives.

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