Sarah Mulholland | BloombergBusiness
Wall Street firms are readying themselves for new rules aimed at requiring them to eat what they cook.
A provision of the 2010 Dodd-Frank law that takes effect in December forces banks to keep a stake in the commercial-property loans they package into securities and sell off to investors. The rule is intended to deter the type of risky lending that helped fuel the last decade’s boom and bust. Under the current business model, banks are encouraged to issue as many loans as they think they can securitize and sell, with underwriting standards sometimes falling by the wayside, said Lea Overby, a debt analyst at Nomura Holdings Inc.
