Large parts of the securitisation markets remain stagnant. Not all efforts to reform them are helpful

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2) an independent party has been paid to vouch for the issuers truthfullness.

* i doubt this assurance system. Who paid them? company.
Their purpose is to assure the info / protect the public interest, but who paid them?

They are not independent practically, they're just independent because everyone (like rkent1) believe.


There is no doubt that straightforward, transparent securitization of loans is a great good. It's the funny stuff that ought to be illegal. As for underwriters, they ought to remain on the hook for the entire term of the loans they approve. To get off, it would be their responsibility to show that there had been a material economic change that they could not reasonably have been expected to forsee.


In a Modigliani-Miller world, there would be no securitization. The only way that disintermediation is economically attractive is if the two parties to the transaction have different assessments of the risk. And one of them is going to be proven wrong.
In the past, Wall Street's dealers have generally shown that they have inside information and can extract rents from the non-Wall Street parties. It was nice to see some of them hoist by their own petard. Unfortunately, the American taxpayer was forced to bail them out. So they are all set to do it again.
All these dealers need to do is regain the 'trust' of their clients. I'd say another 12 months and we'll be back on the same bandwagon.
Without securitization, investors would purchase paper issued by the financial institution - on balance sheet, with reserves, fully transparent. What a frightening prospect!
It is the idiot investors that drive this insane market, all for the 25 basis point extra they expect to earn - until it blows up and they take a 25% writedown. Don't worry, you'll get it back in a century, if you survive.


Fannies and Freddie should be split up into small pieces and sold off.

Also Securization should end. If banks need to raise capital to make loans they should sell bonds. Stop the off balance sheet financing.


Seeing as the current financial and monetary systems are based entirely on Ponzi Scheme dynamics, it matters not what tinkering takes place. Complete failure is inevitable if not imminent. We won't change until it is too late, but we will pay for generations to come.


Chapter 2 of a book published at this year's World Economic Forum in Davos, “Trust Meltdown: The Financial Industry Needs a Fundamental Restart,” includes a detailed explanation of how to use disclosure to create a working, bubble-resistant asset-backed securities market. Links to that book, extensive Congressional testimony, and numerous other posts on the topic are at Sunlight is the answer.


This the best, most succinct statement I've read about the state of securitization. Those who would toss the whole thing and those who would rush it back into full production fail to understand that 1) there used to be a process that worked, but was clunky and costly. 2) technology, greed and laziness replaced that process. 3) We need to restore that part of the process that worked, and try to reduce its cost, and not add more pages to prospectuses and more useless oversight. What we need to know is that 1)issuers have taken care that what they are disclosing is true. 2)an independent party has been paid to vouch for the issuers truthfulness. 3)the issuer has the wherewithal and uprightness to buy back loans for which the warranties were not true, backed by fear of market banishment.



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