A Primer on Securitization

Book Overview

A Primer on Securitization introduces readers to America's newest system of raising capital: what it is, how it operates, and what difference securitization makes.

Gathering fourteen lectures by the pioneers of securitization and by current practitioners--from Freddie Mac, Paine Webber, JP Morgan, Chrysler, McKinsey & Co, and other major players--A Primer on Securitization introduces readers to America's newest system of raising capital: what it is, how it operates, and what difference securitization makes.The securitization process bypasses financial intermediaries that have historically collected deposits and loaned them to those seeking funds, and links borrowers directly to money and capital markets. Although little has been written about what is perhaps one of the most important innovations to emerge in financial markets since the 1930s, securitization has revolutionized the way that the borrowing needs of consumers and businesses are met. Today, for example, over two-thirds of all home loans are being securitized, along with substantial percentages of auto loans and credit card receivables, and the process continues to expand into new fields including synthetic securities. Authoritative and practical, these lectures show how securitization was developed to fill a gap in financial markets. They discuss the nature and causes of the market imperfections that made securitization a valuable source of funds, and describe how securitization has linked local mortgage markets with international capital markets. Readers will gain a broad perspective of the different parties--the borrower, the loan originator, the servicer, the rating agency, the special purpose vehicle, the credit enhancer, the underwriter, and the investor--as well as a detailed analysis of how these parties relate to one another. From the inception of the secondary mortgage market through the collapse of the Granite funds, readers will learn not only about the success but also about the excesses and failures that typically accompany the development of any product in the real or financial sector.

• Format: Paperback
• Language: English
• ISBN: 0262611635
• ISBN13: 9780262611633
• Release Date: July 2000
• Publisher: MIT Press
• Length: 199 Pages
• Weight: 0.65 lbs.
• Dimensions: 0.4" x 6.0" x 8.9"
• Age Range: 18 years and up
• Grade Range: Postsecondary and higher

Customer Reviews

Great background but dated

Kendalll and Fishman's book provided a wonderful historical perspective on the rise of mortgage-backed securities, including the roles played by several of the GSEs (government-sponsored entities) and the Resolution Trust Corporation, which was responsible for cleaning up the balance sheets of failed S & Ls in the early 1980s. I would have liked to see more math, but other than that, the various lectures describe the demand for securitization, how it benefits the housing market, as well as how mortgage-backed securities were received by institutional investors. As has been noted in other reviews, you have to ignore the publication date of July 31, 2000 because most of the lectures were collected from the mid-1990s! Also, it's difficult to understand the perspective of each article, because there is no detailed biography of the contributor. Despite these caveats, the articles are very well written, and the historical perspective is quite valuable.

Insightful!

Editors Leon T. Kendall and Michael J. Fishman adapted these first-hand accounts of the early years of the securitization industry from a lecture series at the Kellogg School of Management. The contributions from financial service pioneers are the book's greatest strength. They elucidate the economic and regulatory forces that made securitization a powerful, versatile financial tool. Each chapter stands alone, but the book does not follow a linear narrative. Caveat lector: these lectures were given in 1994, so the sections on current trends and future expectations are out-of-date. Hence, this primer doesn't cover massive changes in financial regulation, an explosion in the types of asset-backed securities (ABSs), the popularity of derivatives or off-balance-sheet accounting to hide fraud. We from getAbstract suggest this book for those entering the financial services industry or for those who need background history. This does not tell you how today's capital markets work, but it is an illuminating eyewitness account of yesterday's.

Securitization:Most important financial innovation in 25 yrs

The Primer offers an introductory read for those wishing to understand the factors that have been driving the securitization process, how it reshaped the financial industry, and the issues it poses for monetary authorities and regulators. The book's uniqueness rests in that the story of the origins of securitization is told by its founders. Lew Ranieri, Larry Fink, Leland Brendsel, Dennis Cantwell, working at Saloman,First Boston, Freddie Mac and Chrysler Financial respectively, along with others, relate both the challenges they faced and the promise they sought in launching the concept. Every effort is made to identify the principles necessary to expand securitization to new products and fields domestically and internationally. Professor Leon Kendall, Kellogg GSM, Northwestern University, Editor.