Securitization allows banks to repackage and resell debt, famously explained by actress Margot Robbie in a bubble bath in the film “The Big Short.”

Securitization allows banks to repackage and resell debt, famously explained by actress Margot Robbie in a bubble bath in the film “The Big Short.”

The European Union wants to breathe new life into a financial practice most commonly associated with causing the 2008 financial crisis as it tries to jump-start banks’ lending to the economy.

On Tuesday, the European Commission will publish a package of legislation aiming to revive the industry of “securitization,” after strict postcrisis laws almost stamped out the use of the practice in the bloc.

Securitization is the practice where banks repackage and resell debt, famously explained by actress Margot Robbie in a bubble bath in the film “The Big Short.” The engineering allows banks to move some assets off their balance sheets, giving them more space to extend new loans.

  • GreyEyedGhostEnglish
    10·
    19 hours ago

    It also assumes that businesses won’t do anything they think they can get away with if they think it will make a buck. Given just how many times that has happened, saying regulators will catch any attempts to sidestep those rules is fairly optimistic, in my opinion.

    • AlbumEnglish
      4·
      6 hours ago

      It’s the opposite. Regulation assumes business will do anything they think they can get away with if it will make a buck. A lack of regulation assumes companies won’t do those things.

      People think “regulators” allowed this to happen, but actually as “regulators” are agencies established by the government that act upon law. At the time of the 2008 financial crash there were limited or few laws (i.e. regulations) on derivatives. It’s law makers that refused to act.

      It seems people are largely unaware of the myriad of regulatory changes that came after 2008 and bernie that applied to derivatives and customer/investor protection in general.

      The same set of factors that created 2008 is no longer applicable as the environment has changed. There will surely be new regulatory weaknesses that need to be addressed

      • ryathal@sh.itjust.worksEnglish
        3·
        4 hours ago

        Everyone should meet someone that worked in the mortgage industry pre 2008. The number of things that were not only allowed, but perfectly legal were absurd.

        • appraisal was basically a bribe for any number you wanted.
        • no document loans were far more available for anyone.
        • mortgages had no real chain of custody after sale.
        • there wasn’t any real way to verify the risk of a mortgage security pre 2008.
        • variable rates didn’t have lifetime caps on rates, and reporting the details of how they functioned weren’t required.
      • GreyEyedGhostEnglish
        2·
        4 hours ago

        A lack of regulations can mean “anything goes,” as in unregulated, or “nothing of this sort is acceptable,” as in illegal. Checking if the illegal thing has been done is often easier than checking if the regulated thing has been done correctly, so making things that are easily abused illegal makes sense if the consequences of breaking those regulations, such as a global depression, are too great.

        • AlbumEnglish
          1·
          3 hours ago

          Financial regulations are written in law, and thus illegal to violate.

          • GreyEyedGhostEnglish
            1·
            3 hours ago

            I see you’re focusing on semantics, and not the issues raised, which i can only assume is because you have no valid response to the issues and not the wording.

            • AlbumEnglish
              1·
              2 hours ago

              It’s not semantics when what you’re saying doesn’t make sense and is contradictory to reality.

              Actually, I am not sure what issue you’re even raising because of how poorly you communicated.

              I thought about not responding at all, tbh, but then thought that it’s clear you think there is a some sort of material difference between regulation and law.

              Checking if the illegal thing has been done is often easier than checking if the regulated thing has been done correctly,

              pointedly incorrect. and thats my point that checking the illegal thing is the same thing as checking the regulated thing. but you assert there is some difference.

              • GreyEyedGhostEnglish
                1·
                37 minutes ago

                Then allow me to rephrase. Checking if the forbidden thing has been done is often easier than checking if the thing which is allowed, but with many caveats and conditions, has been done correctly.