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Politics : Ask Michael Burke
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To: Jess Beltz who wrote (41736)12/31/1998 12:56:00 PM
From: yard_man  Read Replies (1) of 132070
 
Your analysis is static (not -- as in noisy).

If the loans go off the banks books then the banks can loan more than if the banks still had those loans on the books -- more loans will be made.

From a larger perspective it seems that these asset backed securites allow for the growth of credit outside the fractional reserve requirements which traditionally have limited the banks ability to create credit. The process is dynamic, though. As the additional credit is created it has an effect on the prices paid for assets, people are willing to pay more for assets than they would have had the additional credit not been created.
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