mal
Diamond Member
It Wasn't a Mortgage Recession After All: So Why Don't We Feel Better?
Interesting Take...
Incomplete, but Interesting.
peace...
Interesting Take...
Incomplete, but Interesting.
peace...
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Interesting Take...
Incomplete, but Interesting.
peace...
It Wasn't a Mortgage Recession After All: So Why Don't We Feel Better?
Interesting Take...
Incomplete, but Interesting.
peace...
...subprime mortgage securitization was a mess -- a house of cards probably doomed to fall -- but subprime by itself simply wasn't big enough to put the entire financial system at risk. That required a failure of the Renew Sale and Repurchase (REPO) market for collateralized securities that over the last 30 years had come to backstop global finance.
The problem here, of course is that hardly anyone has even heard of REPO, which manages to be an unregulated, uninsured $20 trillion business that is absolutely essential to keeping money flowing in the world. Subprime is only $1.2 trillion -- not big enough by itself to wag this dog.
According to Gorton, the entire basis of global banking changed in the 1980s, thanks to money market funds and junk bonds, which took all the profit out of being a traditional bank. So banks began securitizing loans to regain those lost profits.