A report released just this March by the President's Working Group on Financial Markets (PWG), of which I am a member, and an even more recent study issued in April by the international Financial Stability Forum (FSF), in which the Federal Reserve plays an active role, document the nature of these weaknesses.
1 These reports emphasize that substantial improvements in the originate-to-distribute model as practiced over the past few years are necessary if its potential benefits are to be realized. The reports pointed out that problems occurred at each step of the credit-extension chain. First, at the point of origination, underwriting standards became increasingly compromised in recent years.