1mo ago

EU resurrects banking practice that caused the 2008 financial crisis

www.politico.eu

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.

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CAVOK @lemmy.world

1mo ago

EU resurrects banking practice that caused the 2008 financial crisis

www.politico.eu /article/european-union-securitization-banking-debt-2008-financial-crisis/

31 comments

Securitization is a tool and only part of why the markets collapsed. The reduction of the problem to securitization fails to recognize the bad loans and ineffective ratings given to collateralized securities, and the hidden tranches not disclosed to investors.
If your mortgage/loan market isn't fraudulent then you don't have underlying assets with impossibly high risk. If the ratings agencies properly rate securities then investors know what the risk is. And if the government regulates the issuance of these securities through prospectuses (which they do now) then investors will know what's in them.
- Makes more sense to control the factors that play into the investment risk through regulation instead of shutting down a useful tool for investors.
  Or you can just say edgy bullshit.
- 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.
  
  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
- That's kinda like saying that the water in the ocean is part of why fish are able to swim.
  
  No, it's like saying fire extinguishers are bad because someone replaced the real ones with gag ones in a building that burned down.
  
  No that's a bad analogy because no one is arguing the water should be taken away because of a misguided understanding that it's inherently dangerous.
  The actual analogy is "People have died in water, so no one should swim anymore"
  But that's obviously absurd. You hire life guards, teach people to swim, get a life vest, life savers, etc
- The markets are still fraudulent. The fines are really just a cost of doing business.

What could possibly go right?
- But money.

The US never stopped. Never even slowed down. They literally just changed the name. I am 100% serious.

Ahh yes, roll back all the protections right before the big crash.

a few guys make money and thousands of regular people lose their retirement savings. cool
- Following the lead of America.

"Breathe life" sounds more like a failed CPR attempt. There should be a DNACPR in place to preserve Europe's banking sector's dignity

We need esteemed actress @MargotRobbie@lemm.ee in here.
- Hasn't posted in a few months, must be busy with that Ocean's Eleven project.
  
  She's gonna have to use her .world account if she comes back.

I don't mind creating a proper European security investment market. But I most definitely mind an uncontrolled asset derivatives markets, which when abused, (and it will becasue they can) will most probably lead to a new financial crisis.
"The ECB also called on the Commission to draw on “the lessons of the global financial crisis, when opaque and complex securitisations led to excessive risk-taking,” warning that the EU should “ensure that securitisation does not create excessive leverage in the financial system by fuelling asset bubbles and hiding risks on bank balance sheets.

So to summarize.
They want us to trade resources to transfer the ownership of “a measurement” of an entity its irresponsible behaviour with resources to a different entity.
This somehow makes it more likely that the institutions with the most economic resources let others use those resources for a small long term profit to those institutions?
Ands this does what exactly for the common human or the wellbeing and natural resources of the shared planet?
For all i understand this can create world peace but i am gonna need someone to explain that one to me if that is the case.

Don't do this, EU. You're better than this.

31 comments