Securitization made debt restructuring difficult, if not impossible.

Blame should go to the phenomenon of securitization.

But there remain little new securitization and bank debt offerings without government backup.

Moreover, securitization contributed to bad lending in the old days, banks that originated bad loans bore the consequences in the new world of securitization, the originators could pass the loans onto others.

Before securitization, banks typically held mortgages now they could get them off their books.

Second, the securitization model is badly broken and not likely to be replaced anytime soon.

Securitization, with all of its advantages in sharing risk, has three problems that were not adequately anticipated.

For example, asset management, distribution, underwriting and securitization, and proprietary trading would be separated in various ways.

For example, asset management, distribution, underwriting and securitization, and proprietary trading would be separated in various ways.

This systemic risk a financial shock leading to severe economic contagion was supposed to be reduced by securitization.

2. thanks to securitization, private equity, hedge funds, and over the counter trading, financial markets have become less transparent.

The main impetus for the boom came from the entire machinery of private label securitization, which was just that private.

Prominent examples of regulations with a direct negative impact include existing rules on securitization and proposed rules on asset based capital charges.

Others did so because the banks, shocked by the collapse of the securitization business, stopped giving them home equity loans for consumption purposes.

This gave rise to the first causes of the crisis the originate and distribute model of securitization and the extensive use of leverage.

Thus, there is systemic market risk, and unregulated securitization of banking assets, which was the main cause of the recent collapse, adds to it.

But others those involved with the securitization of mortgages were clearly important long run innovations, because they can help spread risks better around the world.

No player but the last in the securitization chain was exposed to the ultimate credit risk the rest simply raked in high fees and commissions.

Because securitization meant that banks were not carrying the risk and earned fees for transactions, they no longer cared about the quality of their lending.

Securitization (and shadow banking) will be kept simple and proceed at a measured pace as a new legal and regulatory framework is built and tested.

The opaqueness, wholly unnecessary complexity, and near impossibility of undertaking independent due diligence on these structures underlying risk have undermined trust in the securitization market.

The genius of securitization, the great financial innovation of the 1990 s, was that it allowed investors in theory to bypass non transparent black box banks.

Securitization, structured finance, and other innovations have so interwoven the financial system s various players that it is essentially impossible to restructure one financial institution at a time.

Securitization avoided such costs and placed the new product advantageously with the complicity of rating agencies, which stood to profit from investors inexperience and lack of information.

Similarly, the move from a lending model of originate and hold to one of originate and distribute based on securitization led to a massive transfer of risk.

But, with the advent of debt securitization, creditors have become far more numerous, and include hedge funds and other investors over whom regulators and governments have little sway.

If successful, they will impair the revival of a transparent, responsible, and vibrant securitization market a market that, if properly managed, can contribute meaningfully to sustainable, long term economic growth.

Before securitization, banks typically held mortgages now they could get them off their books. But securitized credit taken off one bank s balance sheet usually ended up on another bank s books.

And the remedies that the Commission has suggested so far for example, encouraging crowdfunding and standardizing the terms of securitization appear unlikely to promote rapid growth in non bank finance.

At the same time, monetary injections cannot resolve the generalized uncertainty of a financial system in which globalization and securitization have led to a lack of transparency that has undermined trust and confidence.

Add to that the American financial sector s untenable subprime and securitization activities, and it is not surprising that the next two years brought the global financial system to the brink of outright collapse.

The opaqueness, wholly unnecessary complexity, and near impossibility of undertaking independent due diligence on these structures underlying risk have undermined trust in the securitization market. Financial institutions and their trade bodies are doing themselves no favors by vigorously opposing meaningful reform.

In the last quarter of 2007 alone, Mexican issuers sold 1.5 billion in new mortgage backed securities a significant portion of 4.4 billion outstanding with only a slight drop in prices to reflect globally induced risk, according to the publication Asset Securitization Report .

We can also add to these financial risks the massive problems of bond insurers that guaranteed many of the risky securitization products such as CDOs. A very likely downgrade of these insurers credit ratings will force banks and financial institutions that hold these risky assets to write them down, adding another 150 billion to the financial system s mounting losses.