Comment Letter Responding to the Financial Stability Oversight Council’s Advance Notice and Request for Comment on the Criteria for Designating a Nonbank Financial Company as Systemically Important.

November 05, 2010

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Topics: "too big to fail alignment of interests, asset mix, assets under management, bank holding companies, banks, Board of Governors, BofA Merrill Lynch, Borrowing, broker-dealer, capital markets, CFTC, Cleared Transaction, collateral, Collateral Posting, Colombia University, Common Adviser, Congress, counterparties, counterparty risk management, Counterparty Risk Management Policy Group, credit exposure, Debt Guarantees, diversified portfolio, due diligence, Equity Capital Stability, FDIC, FDIC deposit insurance, Fed Chairman Bernanke, Federal Financial Institutions Examination Council, Federal Reserve System, Federal Reserve's Discount Window, Financial Assets, financial institutions, Financial Market Participants, Financial Stability Oversight Council, financial system, FSOC, gates, global mutual fund industry, Government-Funded Capital, Government-Issed Charter, hedge fund industry, hedge funds, high water marks, Highly Illiquid Assets, Inadequate Counterparty Risk, insurance companies, Investment Company Institute, investment portfolio, Legally Distinct Funds, leverage, leverage ratio, Liquidity Restrictions, Long Term Capital Managment, LTCM, major swap participants, margin requirements, market participants, Nonbank Financial Company, off-balance sheet exposures, OTC, OTC Derivatives Trades, over-the-counter derivatives, overnight borrowing, performance fees, Periods of Redemption, Position Size, prime brokerage, Redemptions, regulatory regime, retail investors, risk monitoring, risk-adjusted returns, SEC, Securities Exchange Commission, Short-Term Funding, Side Pocket Vehicles, sophisticated investors, Standardized Transactions, Structure of the Industry, swap dealers, systemic risk, Systemic Risk Monitoring, Systemically Important Financial Companies, Systemically Important Institutions, Systemically Relevant Firms, TARP, Troubled Asset Relief Program, U.S. Banking Industry, U.S. Financial Stability, ultra-high net worth individuals, Uncleared Transaction,
From: MFA, Richard H. Baker

To:

The Honorable Timothy F. Geithner, Chariman, Financial Stability Oversight Council
Sheila C. Bair, Chariman, Federal Deposit Insurance Corporation; Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System; Edward J. DeMarco, Acting Director, Federal Housing Finance Agency; Gary Gensler, Chairman, Commodity Futures Trading Commission
Debbie Matz, Chairman, National Credit Union Adminstration; Mary Schapiro, Chairman, U.S. Securities and Exchange Commission; John Walsh, Acting Comptroller of the Currency

MFA submitted a comment letter to the Financial Stability Oversight Council in response to the Councils advance notice and request for comment on the criteria for designating a nonbank financial company as systemically important. In the letter, MFA discussed the relatively small size, lack of concentration, structure of the industry and the relatively low use of leverage by the industry, each of which are factors likely to be considered by the Council in assessing the hedge fund industry. MFA expressed support for reporting to regulators to ensure they have the information needed to assess systemic risk and encouraged the Council to base its decisions on analysis of quantitative data. MFA also expressed the view, that in light of the key factors discussed in the letter, MFA believes it is highly unlikely that any hedge fund is systemically important at this time.

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