Let’s see if we can start by agreeing on some basic facts. First, the process of securitization was unquestionably enormously successful in the early part of this decade in attracting huge sums of capital from all around the world to fund loans to U.S. households and firms. Without securitization, it is inconceivable that we would have seen anything like the $4.3 trillion in new non-agency household mortgage loans issued between 2004 and 2006.
Second, surely we can agree today (though some may have still thought otherwise as recently as May of 2007) that this success was absolutely not
spurred in large part by innovations that reduced the costs for lenders of assessing and pricing risks. In particular, technological advances facilitated credit scoring by making it easier for lenders to collect and disseminate information on the creditworthiness of prospective borrowers. In addition, lenders developed new techniques for using this information to determine underwriting standards, set interest rates, and manage their risks.
http://www.econbrowser.com/archives/2009/07/looking_for_an_1.html
