Senetors Urge SEC to Adopt Rule Against Conflicts of Interest in Asset-Backed Securities

WASHINGTON, Jan. 12 — The office of Sen. Carl Levin, D-Mich., issued the following news release:

Sens. Carl Levin, D-Mich., and Jeff Merkley, D-Ore., today urged the Securities and Exchange Commission to adopt their proposed rule against conflicts of interest in asset-backed securities. The rule would implement legislation the senators authored as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to prevent such conflicts of interest.

Language prohibiting securities firms from creating asset-backed securities, selling them to clients and then betting against those same securities was a key part of the Merkley-Levin provisions included in the Dodd-Frank Act. Merkley-Levin also included language implementing the "Volcker Rule" to sharply limit risky trading by banks and investment firms for their own profit.

"Asset-backed securities play a critical role in financing mortgages, student loans, cars, credit cards, and more. But during the financial crisis, some firms constructed and sold toxic securities that were filled with bad assets, and sometimes even bet the securities would fail," said Levin. "Senator Merkley and I have worked to restore integrity and stability to those markets by prohibiting the conflicts of interest that spawned the abuses and helped fuel the crisis. We commend the SEC for proposing a rule that help prevent future abuses, but the rule could still benefit by adopting some strengthening measures that we have suggested. We urge the SEC to adopt the rule as soon as possible."

"You wouldn't hire an electrician to rewire your house if you knew that person took out fire insurance against your property. Financial institutions that are supposed to represent the interests of their customers shouldn't be able to bet against them. Strong measures to end damaging conflicts of interest are essential in making sure customers are treated fairly," said Merkley.

The senators' letter to the SEC can be viewed here(http://levin.senate.gov/download/?id=2b479b46-d4ad-46aa-b2aa-2e0634e8984a).

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