Magazine article American Banker

Paulson Outlines Plans for Averting Next Mortgage Crisis

Magazine article American Banker

Paulson Outlines Plans for Averting Next Mortgage Crisis

Article excerpt

WASHINGTON -- While congressional Democrats were unveiling a plan to ease the mortgage crisis, Treasury Secretary Henry Paulson released a report Thursday designed to avoid a repeat.

The recommendations by the President's Working Group on Financial Markets called for licensing mortgage originators, enhancing credit rating agency disclosures, improving risk assessment by regulators and investors, and providing more information about off-balance-sheet assets.

Many of Mr. Paulson's ideas have been tucked into pending legislation or proposed by regulators.

"It's a solution for the future, not for the here and now," said Mark Zandi, chief economist and co-founder of Moody's Inc. "I don't think this makes any difference for what we're involved in."

The report got a decidedly cool reaction from banking industry sources, many of whom said it would do little to prevent a recurrence of problems.

"People won't be spending a lot of time to implement them if or when the market turns around," said Gil Schwartz, a partner at Schwartz & Ballen. "I don't think any of these recommendations would solve anything."

Joshua Rosner, a managing director at the research firm Graham Fisher & Co., said he "really didn't see anything that new in there. I didn't see anything implementable and anything much more than a status update."

Chris Cole, regulatory counsel for the Independent Community Bankers of America, said the plan "reflects the fact that at this point, the administration seems to have run out of tools to work with, and I think they seem to be reluctant to go on to the next step, which would be greater government intervention."

The plan also appeared short on some key details, observers said. It called for increased disclosure by credit ratings agencies - and called on regulators to review their use of ratings in rules and guidance - but the Treasury provided few specifications on how they should be changed. …

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