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Securitized Debt More at Risk From Volcker Rule, Mass Says

January 25, 2012

(Updates with comment from PNC executive starting in fourth paragraph.)

Jan. 23 (Bloomberg) -- Securitized debt markets may be more damaged than trading in corporate bonds or stocks by new rules that will restrict the risks banks can take, said Ronald Mass, co-head of structured products at Western Asset Management Co.

Liquidity in markets for securities backed by loans and leases depends more on dealers being willing to hold inventories, something that the so-called Volcker rule would crimp, Mass said in Las Vegas at the American Securitization Forum’s annual conference.

“It’s something that’s a really big concern,” he said. “Hopefully it won’t turn out in the design of the strictest interpretations.”

International rules known as Basel regulations on the capital that banks must hold also are wrong to impose greater penalties on low-rated securitized debt than loans and other securities, said Mass and Reginald Imamura, an executive vice president at PNC Financial Services Group Inc.’s bank.

Restrictions on banks can hurt investors and borrowers, Imamura said during a panel discussion with Mass.

“This effects everybody,” Imamura said. “These rules are not just about banks.”

Dealer positions in U.S. home-loan bonds without government-backing are down 50 percent to 70 percent during the past year, amid pending regulatory changes and as Europe’s debt crisis roils markets, Mass said.

--Editors: Shannon D. Harrington, Mitchell Martin

To contact the reporter on this story: Jody Shenn in New York at

To contact the editor responsible for this story: Alan Goldstein at

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