Sunday, January 12, 2014
Securitization Increasing
Securitization, the process of pooling different types of debt into bonds that have payments backed by the debt, is on the rise.
Mortgage backed securities (MBS) and collateralized debt obligations
(CDO) were blamed in part for the 2008 financial meltdown. In 2013,
about $800 million of securitized debt was issued worldwide (excluding
residential mortgages). Although a dramatic increase from the $200
million or so issued in 2009 and 2010, the total is far short of the
more than $2.5 trillion issued in 2005 and 2006. Although regulators
often argued about the evils of securitized debt, it also allows the
market to pump lending into the system, which could help increase
economic growth.