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Weirdly though, the US have that with Fannie Mae anyway, so it seems peculiar that they still need the repackaging. I'm not going to pretend I know how all this works — i'm sure with the right regulation, it could still be a good system.
And, as here, hasn't the 'money multiplier' income model for banks been debunked somewhat, since private banks create new money with new lending?
(Gonna change my username now — don't want work checking up on me chatting shit about banks during work hours…)
slippers-
Weirdly though, the US have that with Fannie Mae anyway, so it seems peculiar that they still need the repackaging
Fannie (and the other agencies) are the repackager. The agencies buy loans from banks / other originators and fund those purchases by issuing MBS. MBS are acquired by a whole host of buyers including insurers and pension funds (at the senior end) and credit funds (at the junior end). MBS are guaranteed by the issuing agency and the agency is backstopped by the federal government.
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And, as here, hasn't the 'money multiplier' income model for banks been debunked somewhat, since private banks create new money with new lending?
Yes, but I don't totally understand how that relates to my comment. My point is that most banks would have an ALM mismatching problem if their assets were composed of 30-year fixed rate mortgages and their liabilities of 0-5 year deposits.
NickCJ
This is a feature, not a bug.
The only way that 30 year fixed rate mortgages work is if they can be held by someone that has 30 year liabilities to fund them with. The average bank is funded with current accounts and shortish-duration savings products so cannot do this. You need to put them in a form that an insurance company can buy (i.e. MBS). Done right, with a government credit wrap, it's a beautifully efficient system.