Cracking The Code (Last in a Series)

As anyone trying to get a mortgage these days knows, leverage isn’t what it used to be. The Great Deleveraging, begun in late 2007 as the credit crunch took hold, affected the entire corporate and consumer financial services community. Debt became a four-letter word, thanks to the unmasking of sub-prime mortgages as the true villain of the era. Those no-income-no-equity loans took leverage to its theoretical extreme, coming to represent all that’s bad about structured credit and securitization. The carnage it brought to Main and Wall also made it impossible to appreciate all the benefits – liquidity, low cost, diversification of risk – of those off-balance sheet financings.

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