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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-
Fannie (and the other agencies) are the repackager.
Thanks, that's the bit I was missing — makes a lot of sense.
The average bank is funded with current accounts and shortish-duration savings products so cannot do this.
My money multiplier comment was more aimed at this. As I understand it — and this is a bit basic, I'll admit — is that if you throw out the Diamond-Dybvig model, there's no actual connection between their long term assets/mortgages and their short term liabilities/giving out deposits. So in theory we could have 30-year fixes, from new money, because the balances are unrelated, and a bank's ability to pay its deposits is more about their other services.
Or is that too simplistic?
slippers
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…)