Can Wall Street Find a Safer Way to Package Assets?

Bundling loans and selling them to investors proved disastrous. When do we go back for more?


Say you go to a bank to get a loan — for a house, a car, your kid's tuition, whatever. The bank lends you money. Then it packages your loan with a bunch of others into a bond. Investors buy the bond because they like the steady stream of cash that comes from people slowly paying off their debt. In exchange, the bank gets a slug of money up front, which it turns around and uses to make more loans. This goes on for a long while.

Then one day you need another loan. You go back to the bank. But...

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