Arguably, however, there is no particular need for synthetic CDOs, so tight regulation that restricts their manufacture and use should be sufficient. The Frank-Dodd Act imposes significant regulatory burden on synthetic CDOs and the use of credit default swaps to create synthetic CDOs. The full extent of the burden has yet to be defined, in part because the terminology in the risk retention rule has yet to be adapted to these products. Adapting the wording of Section 941 would further regulate and control the use of these instruments. By providing clarity, improved wording would allow regulators to create a tighter framework with fewer loopholes. The regulator would also be able to craft the wording the way it wants, as opposed to having the intent of the law interpreted either in court or by some other body. By closing what could end up as a loophole, the strength of the Frank-Dodd Act would be improved.

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