Subject: File No. S7-35-11
From: Julia A O'Neal

September 3, 2011

The meaning of "asset-backed" has changed. At first, in the early '80s, the pools (if I remember correctly, originating in Larry Fink's department at First Boston) were Fannie Freddie--or at least agency--mortgages. By the mid '90s, I remember hearing that an investment bank was pooling loans that were franchisee debt--situations where the franchisor required facility updates and the franchisee had no other recourse. CMOs had given way to CDOs. Then on to pooling credit card and auto loan debt--or at least that's how I remember the sequence.

In the early- to mid-2000s came the housing bubble, when mortgage loans were given to inappropriate borrowers, then pooled, sliced and diced, and sold as CMOs with various (bought) ratings. Even with computers, and especially with all the paper legal documents of a mortgage, individual agreements were lost in the fray.

Right before the turn of the century, in the midst of this stream of events in the evolution of "asset-backed," came Long Term Capital Management, and the clear insanity of trading options on "securities" that were as amorphous as rainbows.

Asset-backed issues should no longer be exempt from the '40 Act.