Nouriel Roubini : securitisation was key to helping banks avoid the regulators

Professor Nouriel Roubini, and Chairman of RGE a leading New York firm of economic analysts, says securitisation was key to helping banks avoid the regulators

“You make a bunch of mortgages and then you package them and you sell it to someone else,” he explains.
Professor Roubini says that even at the low end of the estimates the potential impact on the rest of the economy is massive.

“If you have a $200bn loss, that reduced your capital by $200bn, you have to reduce your lending by 10 times as much,” he explains.

“So you could have a reduction of total credit to the economy of two trillion dollars”.

The professor predicts that a reduction of credit on that scale will trigger a recession in America which could become global as the contagion spreads through the banking system worldwide.

via www.debtbegonetoday.com