- Jun 6, 2007
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No new bonds based on credit card debt have been issued by any issuer since the beginning of October. Apparently, the logjam is that new accounting rules require banks to report credit card debt as assets on their books which raises the issue of if such a bank goes bankrupt are these credit card debt assets like all the other bank's assets to which the banks creditors could have access to satisfy their debts. If it is such a case it will have a deterrent effect on credit card security investors because such investors would tend to not want to invest if the underlying credit card loans could be made not available to pay the investor if the bank went into bankruptcy.
Just from an ordinary person's viewpoint it seem what the accounting rule body is doing and possibly the FDIC if they rule the credit card assets are assets subject to seizure by bankruptcy creditors is pretty stupid and not good regulation. First, accounting rules should not require credit card loans to be considered bank assets if they were bundled up and sold as securities; rule bodies should consider those credit card loans as owned by the credit card securities owners(unless the banks are going to indemnify the securities' owners if the credit card debtors default). From an honesty standpoint, once the credit card debts are securitized the banks should just be considered as loan serivicers for those credit card loans. It also seems to be very poor transparency to investors having accounting rules which require credit card loans which have been securitized to be reported as bank assets on a banks' books because to ordinary investors it makes such a bank look like it has a larger amount of assets that what an ordinary person would consider it actually has. To an ordinary person when an entity has securitized a loan the entity has lost ownership of that loan unless it has indemnified the secuirty. Along this same vein, when a bank goes into bankruptcy to allow such a bank's creditors to have access to loan assets that have been securitized seems unjust, those loan assets belong to the securities' owners. To an ordinary person what it seems authorities are doing with this new accounting rule is taking a step backward not a step forward.
Just from an ordinary person's viewpoint it seem what the accounting rule body is doing and possibly the FDIC if they rule the credit card assets are assets subject to seizure by bankruptcy creditors is pretty stupid and not good regulation. First, accounting rules should not require credit card loans to be considered bank assets if they were bundled up and sold as securities; rule bodies should consider those credit card loans as owned by the credit card securities owners(unless the banks are going to indemnify the securities' owners if the credit card debtors default). From an honesty standpoint, once the credit card debts are securitized the banks should just be considered as loan serivicers for those credit card loans. It also seems to be very poor transparency to investors having accounting rules which require credit card loans which have been securitized to be reported as bank assets on a banks' books because to ordinary investors it makes such a bank look like it has a larger amount of assets that what an ordinary person would consider it actually has. To an ordinary person when an entity has securitized a loan the entity has lost ownership of that loan unless it has indemnified the secuirty. Along this same vein, when a bank goes into bankruptcy to allow such a bank's creditors to have access to loan assets that have been securitized seems unjust, those loan assets belong to the securities' owners. To an ordinary person what it seems authorities are doing with this new accounting rule is taking a step backward not a step forward.
