WASHINGTON – Federal regulators are insisting that banks share some risk when issuing the type of asset-backed securities that nearly toppled the financial system two years ago.
The Federal Deposit Insurance Corp. is requiring banks hold at least 5 percent of the securities on their books, as part of new rules the regulator adopted Monday that were required under the new financial overhaul law. Banks would be required to purchase their share of the securities beginning Jan. 1.
The idea is that banks with such exposure to risk would be more careful about properly screening borrowers. Experts say it was the lack of committed “skin in the game” that enabled a system in which bundles of mortgage loans were transferred from investor to investor, with no one assuming responsibility for the risk until the roof caved in.
Financial industry executives have opposed the FDIC requirements. Banks don’t have enough room on their balance sheets to retain 5 percent of all the loans they make, some executives have maintained.
The so-called “skin-in-the-game” requirement was mandated by the financial overhaul law enacted in July. There is an exemption to the requirement. Banks won’t have to meet it for mortgage securities that contain so-called “safe” loans, such as a traditional 30-year fixed-rate mortgage with a 20 percent down payment.
The securities may contain bundles of mortgage, credit card or auto loans. The securities will have to meet the FDIC’s requirements to ensure that the government doesn’t seize them if the bank fails.
Chrysler workers fired for drinking
DETROIT – Chrysler Group LLC says it has fired 13 plant workers a Detroit TV station caught drinking alcohol and smoking what appeared to be marijuana during breaks.
On Sept. 22, the company said it was suspending the workers. On Monday, Chrysler said it fired them.
LONDON – A wealthy British businessman who owns the company that makes the two-wheeled Segway has been found dead in a river in northern England after apparently falling off a cliff on one of the vehicles, police said Monday.
The body of 62-year-old Jimi Heselden and a Segway personal transporter were found in the River Wharfe and he was pronounced dead at the scene, West Yorkshire Police said.
A witness had reported seeing a man fall Sunday over a 30-foot drop into the river near the village of Boston Spa, 140 miles north of London.
Police did not release further details.
From wire reports
• BlackBerry maker Research in Motion Ltd. is launching a new tablet computer early next year called the PlayBook. The PlayBook will have a 7-inch screen, making it half the size of the Apple iPad, and weigh about 0.9 pounds to the iPad’s 1.5 pounds.
• Wal-Mart Stores Inc. is offering to buy South African retailer Massmart Holdings Ltd. for about $4.25 billion in a bid to jump-start growth beyond its sluggish U.S. business.
• Consumer products maker Unilever NV said Monday it has agreed to buy Alberto Culver Co., the U.S. maker of beauty products such as TRESemme, VO5 and Noxzema, for $3.7 billion in a management-backed deal.
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