Asset Securitization Is Alive and Well

By Reich, Marc A. | American Banker, June 17, 1991 | Go to article overview

Asset Securitization Is Alive and Well


Reich, Marc A., American Banker


Asset Securitization Is Alive and Well

An April 1 article ["Securitization, After Fast Growth, 29% Below Last Year's First Quarter," page 1] gave an incomplete picture of bank loan securitization and could stigmatize banks that use it.

The writer cited several reasons why first-quarter securitizations fell below the year-earlier level. These include easier access to alternative markets, investor concerns over the quality of loans securitized, a reduced supply of loans available for securitization, and higher transaction costs.

Though I agree with much of the article, I have several criticisms:

* It addressed securitization only in terms of the experience of large, somewhat troubled banks that securitize via the public markets.

* It referred to securitization solely as a balance-sheet management tool used by institutions with capital adequacy problems and limited alternatives; no mention was made of securitization's value as a strategic tool.

* It suggested that if causes for the slide in issuance persist, securitization will decline as a key funding strategy.

By focusing only on large, troubled banks, the article ignored the benefits that can be realized from securitization by a large segment of your readership -- managers of healthy banks with assets in the range of $500 million to $3 billion.

The president of one of my company's clients, a well-capitalized and very profitable $1.5 billion bank holding company, recently commented to me that securitization must be viewed as a process, not an event.

It is not a one-time quick fix of a problem, he said. Rather, it is an ongoing means of responsibly meeting loan demand while capturing the fee income and ancillary business generated by such loans, and of subsequently selling the loans in a securitized form -- normally at a tidy profit.

He also recognized that securitization is valuable in managing asset allocation and liquidity.

Different Perspectives

Troubled institutions view securitization as a problem-solving event. Healthy ones treat it as an ongoing way of doing business, with multiple benefits.

The reasons the article gave for the recent decline in securitizations apply mainly to large, troubled banks and should not be regarded as leading to a shift away from securitization by the industry as a whole.

Consider the following:

* Easier access to alternative markets. It is true that larger institutions in general have gained greater access to the capital markets over the past few quarters. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Asset Securitization Is Alive and Well
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.