The End of Banks?
The fundamental question raised by the current financial crisis is who monitors opaque loans, whether of the sub-prime or any other variety. Traditionally, the answer was banks; in the securitized world, it remains a question.
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BARCELONA – Are banks doomed as a result of the current financial crisis? The securitization of mortgages originally was seen as a triumph, because it shifted risk to financial markets, while taking deposits and making and monitoring loans – the purview of traditional banks – was regarded as narrow and old-fashioned. By contrast, modern banks would seek finance mainly in the interbank market and securitize their loan portfolios.