Phenomenon of Securitization

[TJ_98370]

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Talk about closing the proverbial barn door after the horse has bolted.



March 5 (Bloomberg) -- The "phenomenon of securitization" must be curtailed by lawmakers to prohibit banks and mortgage lenders from shifting all the risk on loans they originate and sell to investors, U.S. House Financial Services Committee Chairman Barney Frank said.
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"I will be pushing for legislation that will make it illegal for anybody to securitize 100 percent of anything," Frank, a Massachusetts Democrat, told reporters at a briefing in Washington today. Securitization is a "large part" of the problem in the housing market, he said......
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......"It's 100 percent securitization that allows bad originations because people make loans and don't have to worry about being paid back," Frank said. "Nobody should be taking more risk than he or she can afford to pay off."
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Lenders and companies that securitize loans should be required to take into account the borrower's ability to repay the mortgage, Frank said. The changes may be part of a bill that would create a new financial regulator with more authority than the government currently has to curb systemic risks, he said.......
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[jon]

The markets didn't collapse because people bought financial assets from one another, but rather because they knew the government would always be there to print up enough money to make good on the debt. So they were willing to lend to people who had nothing to lose and every thing to gain by purchasing a house with no money down.

The real solution is to shut down the FMs.