Back in 1970, Ginnie Mae was created to securitize the mortgage industry. Previous to it, mortgages were originated at a local bank and said bank held onto it for decades. Once securitized, it was pooled into an SPV and then sold to an institutional investor. This freed up capital at the banks to make even more loans; therefore creating a vibrant housing market. This of course didn’t mean prices would go up indefinitely, much of that is dependent on the underlying economic realities and as we all know leverage can play a serious role in de-risking investors to the point or insolvency. But the MBS model certainly helped banks and the overall economy, turning illiquid assets liquid and eventually helped intertwine global capital markets. <\/p>
Now this is about to happen to AI related debt.<\/p>