Legislative reform should be investor´s oriented
At the beginning of the decade of 1980 banks and lenders began to package mortgages and other predictable cash flows through securities issuance, up to an outstanding balance of three trillion dollars at the end of 2008. For years, in a low interest rate environment, they sold these securities aimed at generating higher returns to investors. But with the bearish spiral of the residential market and escalating leverage toxicity became clear, leading to a lack of liquidity of counterparts. In fact, compensations were based on volume of operations rather than on quality of borrowers or collaterals and many relied heavily on credit-agency ratings, while they had lack of data and experience.
