Wall Street

No need to be an economist to burst the bubble. But that burst the bubble, is how recklessly rang out, and importantly managed. Speculation has been rampant, loans were issued without proper verification of income or available funds. People plunged through the roof into debt, hoping for a quick profit or just living beyond their means. Here begins the funny, which explains some problems that we see today. Historically, that you take out a bank loan and the bank owns the debt and hold it until the very end of the payments.

But in the last 10-20 years on has begun a process called securization which in Russian is best suited within the meaning of corporatization, although I’m not talking about shares, and on other securities traded on the market. In general, and stocks and other securities are called common word – Securities, so let’s use the tracing paper . Let me, before explaining what it is recalled that the credit is a debt for the homeowner, but at the same time, it’s – ASSET (Asset) for Bank. In its simplest form, here’s how it works: Bank takes 10 such loans and combines them into the pool. They can be divided into groups (or tranches, in the jargon of Wall Street), based on credit quality of the homeowner. Good credit – it’s prime (Prime), in the middle – Alt-A, and at the very bottom –