The Securitization Flash Flood

50 Pages Posted: 27 Jul 2016 Last revised: 15 Dec 2021

See all articles by Kandarp Srinivasan

Kandarp Srinivasan

Northeastern University - D’Amore-McKim School of Business

Date Written: June 20, 2019

Abstract

If securitization represents risk transfer, why did banks continue to hold opaque securitizations on their books? This paper argues such holdings were used as collateral for the creation of money-like claims, providing evidence consistent with the view of banks as producers of debt. Using a natural experiment and hand-collected data on over 4,700 repurchase contracts, the paper establishes a connection between the rise of securitization holdings and the use of collateral in short-term debt markets. In the backdrop of the financial crisis, the paper's finding highlights a trade-off between creating bank money and financial stability.

Keywords: BAPCPA, securitization, repo markets, bank holding companies

JEL Classification: G21, G23

Suggested Citation

Srinivasan, Kandarp, The Securitization Flash Flood (June 20, 2019). Available at SSRN: https://ssrn.com/abstract=2814717 or http://dx.doi.org/10.2139/ssrn.2814717

Kandarp Srinivasan (Contact Author)

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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