Subject: File No. S7-34-11
From: James McGuire

September 4, 2011

In Re: The Securities and Exchange Commission today voted unanimously to request public comment on the treatment of asset-backed issuers as well as real estate investment trusts (REITs) and other mortgage-related pools under the Investment Company Act.

Even for those mortgage asset backed securities under governance, there was a failure of compliance with 15 USC 77nnn. Maybe some think, just let time pass-by and the statute of limitations will conceal the fraud for those registered. (THE MERS RECORDATION FACTOR)

Lack of oversight in the Asset Backed security arena is not the largest colorable issue, Swap Agreement Section 3A (b)(3), (A) and (B) raise more of an alarm. Such rules restricted the SEC from preventing fraud. One serious question arises: can Congress pass a law that prohibits a government agency from taking measure to prevent fraud, is it constitutional?

The maximum value of the Mortgage Backed Asset arena per Fannie Mae's number equals approximately $12-14 Trillion dollars in the residential market, however, the unregulated Swap arena would subject parties to additional multi trillion dollar loses greatly exceeding the Mortgage Backed Asset arena. Add failure of compliance in the commercial asset backed arena and the problem increases.

Section 16 3A (b) 3.     Except as provided in section 16(a) with respect to reporting requirements, the Commission is prohibited from--

        A.    promulgating, interpreting, or enforcing rules; or

        B.   issuing orders of general applicability; under this title in a manner that imposes or specifies reporting or record keeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]).

When one addresses only a portion of the legal issues at hand and fail to address all the issues, fraud will find a way to probagate. In the opposite, keeping the  prophylactic on, many have felt the pain of the gizmo. Section 16(a) does allow for equitable relief, but the fact is, the crime should have never been allowed to be committed.

To add another nightmare to the equation, applying 15 USC 7001 to electronic tangible negotiable instruments under Uniform Commercial Code Article 3, well that's the problem, you can't per 15 USC 7003, 15 USC 7003 excludes governance over items governed by Uniform Commercial Code Article 3 & 9. 15 USC 7001 could possibly be applied to electronic payment intangibles and beneficial security interests, but the courts may need to sort some of the specific issues out.

James McGuire