Customer Reviews

A Primer on Securitization

5 star:		(1)
4 star:		(2)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

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.

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 Caveat lector: these lectures were given in 1994, so the sections on current trends and future expectations are out-of-date.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.

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.