consultant
William Richard Cutter (1847–1918), American historian and genealogist

Referencespay factored into bank holdings of the very securities that went bust. What did explain those holdings were regulatory arbitrage opportunities created after the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency finalized the "Recourse Rule," which lowered their capital charges from 8 percent to 1.6 percent.

The study also reports evidence of a "securitization byproduct effect," which means that originating banks had incentives to hold on to the highest rated tranches, instead of the equity tranche, to signal that they stood by their product. Here again, this could well be due to the Recourse Rule. NYU Professor Jeffrey Friedman and Wladimir Kraus show in their book "Engineering the Crisis" that the Recourse Rule increased capital charges on equity tranche holdings from 8