Customer Quote by Adam Tooze
““The idea, in the wake of the savings-and-loans disaster, was to spread risk outward from those immediately involved in lending to mortgage borrowers and to attract investors by turning mortgages into securities that offered a wide range of yield-risk profiles. And it worked. In 1980, 67 percent of American mortgages had been held directly on the balance sheets of depository banks. By the end of the 1990s, the risks involved in America’s system of long-term, fixed interest, easy repayment mortgages were securitized and spread across a much wider segment of the financial system””
About This Quote
Source Book: The Shock Doctrine by Naomi Klein, 2007
The quote describes how mortgage-backed securities spread risk from banks to investors, creating a broader financial exposure that contributed to the crisis.
In simple terms: Mortgages were turned into securities, spreading risk widely.
Key Takeaway
Recognize systemic risk in securitization.
Themes
finance
risk
securitization
history
policy
Mood
analytical
critical
concerned
Type
Customer:1
Investing:1
Mortgage crisis:1
Spread Risk:1
Mortgages Securitized:1
Mortgages Securities:1
American Mortgages:1
Securitized Spread:1
When to use this quote
- banking
- investment
- regulation
- policy making
- academic study
Key Concepts
financial engineering
systemic risk
securitization
market dynamics
Questions to Reflect On
- How does securitization affect financial stability?
- What safeguards could prevent risk diffusion?
A Different Perspective
Risk can be hidden in complex products, leading to unexpected crises.
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