Chairman Garrett, Ranking Member Waters, and members of the Subcommittee, thank you for the opportunity to discuss the implementation of the risk retention requirements of section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd–Frank Act). This provision seeks to promote sustainable availability of credit by requiring that securitizers generally retain some of the credit risk of the assets they securitize (sometimes referred to as "skin in the game"). Retaining credit risk creates incentives for securitizers to better monitor the credit quality of assets they securitize and ultimately discourages unsafe and unsound underwriting practices by originators.
In my testimony, I will discuss problems associated with the securitization process that became prominent during the crisis and how the risk retention requirements of the Dodd-Frank Act may help both to alleviate these problems and to provide positive incentives to market participants.
See full Press Release.
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