Barnett Sivon & Natter, P.C.

Congress is in the process of re-acting to the problems caused by subprime lending and securitization of subprime debt.  As the extent of the problem grows, Congress will respond with legislation to "reform" the marketplace and "punish" the guilty.  Wall Street firms will be a clear target, and one can expect new laws and rules to be forthcoming in 2008,

The mortgage rate freeze announced on December 6 will be harder to implement than one might think.  Many questions remain and the answers will have to be negotiated among the parties.  But even after it is implemented, it will not be enough and additional measures will be necessary.

The 18 month moratorium on approvals of commercial firms acquiring industrial banks will not be extended past January.  The FDIC may not have the legal ability to block the acquisition of banks by Wal-Mart and Blackstone (Alliance).  This could open the flood gates for other deals as well.

Many of the larger financial services firms have been hurt by the subprime mortgage downturn, with most of the damage resulteding from the loss of confidence in the credit markets for MBS, CDOs and other instruments that would be tainted by subprime collateral.  However, the industry is also heavily exposed to commercial real estate (CRE), and the percentage of capital tied up in CRE loans is...

Blackstrone Group (BX) acquisition of Alliance Data (ADS)may be held up by the FDIC due to controversy over industrial loan companies?  Approval is likely to be delayed at least until the end of January.  It all hinges on whether Blackstone is viewed as a commercial or financial company.