"Banks love securitization because it's cheaper for them than holding loans on their books, and having to pay for them in equity capital and FDIC insurance. But those requirements are precisely what make a market safe and fair. They are buffers against risk, which in securitization gets transferred to investors. The market proved incapable before and during the crisis of properly pricing that risk, and now everyone knows it. So the investors are wisely staying away. And if these markets no longer work, then perhaps it's time to rethink the wisdom of the 30-year fixed rate mortgage (which most other countries don't have) and come up with a way for lenders to retain the risk while still protecting themselves against catastrophe."
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