Campaign to make securitisation illegal
The selling off of debt to a third party, that in turn bundles it up with others and sells it to pension funds is called securitisation and has led to our current economic woes. The banks, free from the risk of default, lended openly to those that could not pay the debt back. The impact on pension funds has yet to be fully discovered.
... and the banks are still doing it! They give them selves enormous financial rewards as they undermine our society. The Courts find it all too complex and do nothing to stop this global fraud. We should.
Bob Wallum
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Anonymous
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Not sure chap - there is a rule that says the banks have to retain 5% of all securitisations, and most UK banks structure securitisations as master trusts - that is to say they are retainined on their balance sheet and so losses do affect them.
There's also the matter of trust in the market - securitisation is a major source of funding without which banks would face difficulty functioning - and the price of mortgages would shoot up. If banks originated low quality mortgages, this would bear out in the securitisations and investors would not buy them.
So banks have a fairly high incentive not to do as you describe...
Further, I'd advise looking at the differences between the US securitisation market and teh European/UK market. Very few (if any) of the practices you describe happened in the UK.
