Bloomberg: Treasury Secretary Paulson Foreshadows Proposals to Tighten Loan Rules

[El Pinko]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTbGQgJvXsvo&refer=home

Paulson Foreshadows Proposals to Tighten Loan Rules
By Peter Cook and John Brinsley


Feb. 14 (Bloomberg) -- Treasury Secretary Henry Paulson said U.S. regulators plan to alter rules for packaging loans into bonds in the aftermath of the subprime-credit collapse.

Paulson and Federal Reserve Chairman Ben S. Bernanke, who testify before Congress today, first want markets to stabilize, reducing borrowing costs for companies and consumers. Policy makers are trying to revive an economy that expanded at the slowest pace since 2002 last year.

Paulson, Bernanke and their counterparts at the Securities & Exchange Commission and Commodity Futures Trading Commission are ``carefully'' reviewing loan securitizations, the Treasury chief said yesterday. The process magnified losses on subprime mortgage-linked securities because it reduced the incentive for lenders to ensure that borrowers could repay their debts.

``You can't have gone through the process we've gone through without knowing there needs to be some changes,'' Paulson, 61, said in an interview with Bloomberg Television yesterday in Washington. ``First, we need to get through this period with as little impact as possible on our economy. And then secondly, we need a strong policy response.''