In November 2001, bank regulators finalized the so-called Recourse Rule, which lowered risk weights from 1 to 0.5 for A-rated and to 0.2 for AAA- and AA-rated private-label securitization tranches. After the rule change, on average, securitization-active bank holding companies with at least $50...

In November 2001, regulators finalized the “Recourse Rule.” The rule lowered risk weights, and therefore commercial bank holding company capital requirements, to 0.2 for holdings of AAA- and AA-rated “private label” securitization tranches, created by investment banks and securitizing...