As a number of academic studies have emphasized, the basic pooling-and-tranching structure of these securitizations can help reduce adverse selection problems in markets, and thereby increase liquidity and reduce financing costs. See, for example, Gorton, and Pennacchi (1990), DeMarzo and Duffie (1999), and DeMarzo (2005). 11  See Rajan (2006) for an early exposition of the reach-for-yield phenomenon.
2  Ben S. Bernanke (2013), “Stress Testing Banks: What Have We Learned?“ speech delivered at the “Maintaining Financial Stability: Holding a Tiger by the Tail” financial markets conference sponsored by the Federal Reserve Bank of Atlanta, Stone Mountain, April 8.