Thursday, February 11, 2010

van Duyn: securitization wobbles

"..This is why policymakers are secretly so worried about this market – what will happen to borrowing costs if these markets remain dysfunctional?

So far, this issue has been patched over by the fact that the US government – through the government-guaranteed mortgage agencies Fannie Mae and Freddie Mac – has been financing the US mortgage market.

But this cannot go on for ever – not least because at some point the US government’s debts and liabilities might come under more scrutiny than now. When they do, a nasty question needs answering: how will US economic growth and the recovery in housing be affected if securitisation financing is no longer available..."

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