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European Tribune - Tiptoeing around the Anglo Disease
Now, money market funds buy asset-backed securities from conduits filled by banks originating loans from brokers. The advantage of this system is that no one entity need be overexposed to any one borrower. The disadvantage is that the seller at each step has the ability and incentive to offload bad loans to the buyer.
The mistake in this case was for the regulators to allow loans to be sold to unregulated (non-bank) entities. Banks should be able to sell on the cash flows if they want, but the loan should remain in the banks' books.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 26th, 2008 at 11:03:20 AM EST

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