The “originate and distribute” model would arguably not have been possible without the benign economic and financial backdrop notably robust global economic growth, low inflation, a low level of interest rates, low default rates and rising asset prices in many countries, not just in the USA.
This Goldilocks economy, where conditions were neither “too cold” nor “too hot”, had – as a side effect – masked the gradual build-up of financial imbalances; a development many of us have seen already before the turmoil. And the BIS is one very prominent example that made this very clear already at an early stage of the process.