Offering insurance to investors in asset-backed securities could keep markets and the economy running smoothly.
As economies develop, debt plays an ever-greater role in supporting consumption and growth. Banks now rely heavily on selling the loans they extend, so hiccups in the securitization markets can lead to abrupt slowdowns in lending. Securitization was once an esoteric part of Wall Street, of interest only to financial types, but it’s now critical for the economy’s health. getAbstract recommends this innovative analysis by economist Alyssa G. Anderson on why securitization markets failed in 2008 and how to reduce the risk of a recurrence.
In this summary, you will learn
- Why bank lending depends on securitization markets
- How ambiguity explains securitization market behavior in 2008
- Why an insurance-like product can help prevent future market failures
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