Impact of Securitization

Jes Villa

Chapter 7 in Ethics in Banking, 2015, pp 139-151 from Palgrave Macmillan

Abstract: Abstract Because a sub-prime loan was extended to someone with a poor credit record, it was highly profitable to the lender, who demanded and received higher interest rates for the additional risk. Although a traditional bank had to carefully assess the creditworthiness of its borrowers in order to maintain sound asset quality because it provided loans from its deposit base, a sub-prime lender did not take customer deposits but funded itself from the money market. These lenders did not hold on to their loans but sold them off to investors.

Keywords: Interest Rate; Central Bank; Federal Reserve; Credit Default Swap; Money Market (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-34028-3_7

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DOI: 10.1057/9781137340283_7

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