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Transparency through Financial Claims with Fingerprints – A Free Market Mechanism for Preventing Mortgage Securitization Induced Financial Crises

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Author Info

  • Helmut Gründl
  • Thomas Post

Abstract

Lack of transparency in securitization transactions significantly contributed to the severe financial crisis of 2007–2009. To increase transparency we propose a new mechanism: financial claims with fingerprints. They would allow market participants at each stage of the securitization process to obtain easily full information about the underlying original risks and the superior claims that need to be satisfied before receiving their own payoffs. The fingerprint mechanism would considerably enhance transparency in securitization transactions at the expense of some transaction costs, while reducing the need for government involvement in securitization markets.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2009-018.pdf
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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2009-018.

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Length: 13 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2009-018

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Keywords: Financial Crisis; Securitization; Mortgage-Backed Securities; Transparency; Opaqueness;

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  1. Gary Gorton, 2008. "The Panic of 2007," Yale School of Management Working Papers amz2372, Yale School of Management.
  2. George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
  3. Martin Hellwig, 2008. "Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_43, Max Planck Institute for Research on Collective Goods.
  4. Franke, Günter & Krahnen, Jan Pieter, 2008. "The future of securitization," CFS Working Paper Series 2008/31, Center for Financial Studies (CFS).
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