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Politics : GOPwinger Lies/Distortions/Omissions/Perversions of Truth -- Ignore unavailable to you. Want to Upgrade?

To: geode00 who wrote (146008)	11/6/2008 4:41:55 PM
From: TimF	Read Replies (1) \| Respond to of 173976

No, it is the securitization of loans that takes the risk out of originating loans. It reduces the risk considerably (or really transfers most of it to someone else) which is why in the context of the perverse incentives government set up, and generally "bubbly" market conditions it contributed greatly to the problem. But it wasn't the whole problem, and also it existed to a much larger extent than it otherwise would have because of the actions of the government. Government lower reserves if you held securitized pieces of multiple loans than if you held actual loans amounting the the same amount of debt, even if on the average the securitized loans where riskier. And that's just one way in which government pushed securitization, not the only one. There was lots of regulation and rules, its just that many of them contributed to the problem, such as the one I mention above.