New plans set out by the OCC deputy comptroller in place to make sure the banks whom conduct in predatory loans, will be the ones responsible to pay back the collateral and debt left over from the transaction and not the chosen victim. Will the Financial Terrorist comply with these orders from the OCC, or will they just continue their raping and pillaging, Stay tuned.......


http://www.bloomberg.com/apps/news?pid=20601109&sid=a61MgxQKBze...

April 16 (Bloomberg) -- New accounting rules may curb U.S. banks’ willingness to guarantee mortgage-backed investment trusts such as those that cost Citigroup Inc. $14 billion, said
a top official in the Office of the Comptroller of the Currency.

The rules, which took effect in January and give lenders a year to comply, will force banks to account for most such trusts as assets instead of reporting them separately as guaranteed
off-the-books affiliates, said Kevin Bailey, the OCC’s deputy
comptroller for policy. Once on the balance sheet, the trusts
will require 10 times as much capital support.

The shift “fundamentally changed the dynamics of these financing vehicles,” because higher capital requirements make the guarantees too expensive to offer, Bailey said in an
interview this week.

Citigroup guarantees known as “liquidity puts” may have been a primary cause of the New York-based bank’s near-collapse in 2008, Financial Crisis Inquiry Commission Chairman Phil
Angelides said this week. The panel was appointed by Congress to
probe the causes of the mortgage-market’s collapse and
subsequent bank bailouts.

Regulators are trying to prevent a repeat by closing the accounting loopholes, tightening international capital rules and forcing Citigroup and other banks to be “more realistic” in
estimating the likelihood that guarantees will be triggered,
Bailey said in the interview. The liquidity puts allowed
customers to sell debt securities back to the bank at face value
if credit markets froze, a possibility Citigroup traders said
was remote.

Basel Proposal

“We’ve had discussions with Citibank itself to make certain they are much more attuned, whether it’s through understanding off-balance-sheet exposures that may affect their
liquidity or may affect their capital,” Bailey said. The OCC
regulates Citibank NA, Citigroup’s primary banking subsidiary.

Citigroup spokesman Stephen Cohen declined to comment.

A December proposal by the Committee on Banking Supervision in Basel, Switzerland, would require a fivefold increase in the capital required for any liquidity guarantees on asset-backed
securities that remain off the balance sheet, Bailey said. He’s
the OCC’s lead staffer in discussions with the Basel committee,
which coordinates international bank-capital rules.

Those rules probably wouldn’t take effect until the end of 2012 at the earliest, Bailey said.

Because of Citigroup’s liquidity puts, the bank had to buy back $25 billion of mortgage-backed collateralized debt obligations now valued at 33 cents on the dollar as financial
markets broke down in 2007, according to the New York-based
bank’s statements. The writedowns contributed to the bank’s
record $28 billion loss in 2008. It needed a $45 billion bailout
as the bank’s shares plunged 77 percent that year.

Noticed Too Late

Citigroup is still 27 percent owned by the U.S. government after repaying $20 billion of the bailout funds in December.

The OCC didn’t understand the risks of the liquidity puts until it was too late, Comptroller John Dugan testified last week at an FCIC hearing. Neither did former Citigroup Chief
Executive Officer Charles O. “Chuck” Prince, Executive
Committee Chairman Robert Rubin, trading chief Thomas Maheras or
Chief Risk Officer David Bushnell, the men told the FCIC in
separate hearings.

The bank was liberal with guarantees partly because it had to set aside only $1 of capital for every $125 invested, FCIC Commissioner Byron Georgiou said at the hearings. On average,
Citigroup now has about $1 of capital for every $9 investment,
using a regulatory formula that weights assets based on credit
ratings.

The 10% Factor

Liquidity puts qualify for a “10 percent credit conversion factor,” Bailey said in the interview. That means off-balance- sheet assets covered by guarantees require just 10 percent of
the capital required for on-the-books investments, he said.

Citigroup’s CDOs raised money by selling commercial paper, or debt maturing in less than a year, and used the funds to buy mortgage bonds, corporate debt and other securities.

The bank also has $36.3 billion of “Citi-administered asset-backed commercial paper conduits,” according to its annual report for 2009, filed in February. The conduits are
covered by $32.5 billion of “liquidity facilities,” in which
Citigroup agrees to “provide funding to the conduits in the
event of a market disruption,” according to the report.

Under the new accounting rules, Citigroup brought $28.3 billion of the commercial-paper conduits onto its balance sheet on Jan. 1, increasing risk-weighted assets by $13 billion, the
bank said.