Foreword
It is regrettable that many of securitization's contributions to modern finance have been overshadowed by infamy since the financial crisis. While it has made for popular journalism to debate securitization in the abstract, there has been surprisingly little attempted commentary to actually explain what securitization is or does. Possibly, this is due to the fact that most pundits seem to underappreciate the regularity with which securitization techniques can be found in the financial system. The volume of securitized debt alone warrants more study and transparency in terms of the technology's inner workings. Thus, rather than discounting its utility, current thought leaders of finance (and certainly future students) would be best served by having better access to information around securitization's basic value proposition. Surely a more enlightened understanding would allow the debate to move beyond the rhetorical and reorient efforts toward identifying and deploying more practical uses of the technology. With that in mind, a book focused on explaining the basic mechanics of securitization is long overdue.
In its most basic form, a securitization vehicle acts as a small, single-purpose bank. As such, it plays the role of a financial intermediary between end borrowers and end investors. Where it does depart from a traditional bank, though, is in its balance sheet construct. Although it still finances itself by issuing debt and equity like a bank, its assets consist of ...
