I thought this was an interesting little piece of research by
the New York Fed [3].   However, the bit I missed in the
subsequent discussion was the point that this is what
securitisation is for: to allow greater risks to be taken. Not
that I missed seeing what is there, I missed it because they
don't mention it.  Just so that we all understand,
securitisation is the idea of chopping up a loan or a pool of
loans into bonds that can then be sold off to various different
groups of investors. It's often associated with structuring the
pool of loans: say, one group of investors takes the first 10%
of losses, the next the next 20% and so on. But this structuring
isn't necessary: securitisation is just the creation of the
bonds that can be sold around.  And of course lending is, like
any other form of provision of capital or debt to people, all
about managing risk. There's the risk, after all, of absolutely
any loan not being repaid. Further, there's a constraint as to
how much banks can lend and to whom in the ris