President Obama’s plan for overhauling financial regulation includes a proposal that lenders keep some skin in the game by hanging on to 5 percent of the risk they securitize. They couldn’t just bundle and slice loans for investors and wash their hands of it.
George Mason economist Russ Roberts says he doesn’t quite get it:
Here’s my guess. Securitization has gotten a bad name because banks originated loans with no incentive to be careful. So to keep securitization going, we have to force people to take a stake.
But maybe we should have less securitization. This does not seem to be on the table. Why not? Could it be because some one has hopes of making money on it again?