Jane D'Arista

Jane D'Arista is a research associate and co-coordinator of the SAFER Project at the Political Economy Research Institute, University of Massachusetts, Amherst.

Recent Articles

Simplifying Securitzation

With a better system, the economy can have plenty of credit without the outlandish risks and excess banker profits.

The packaging of loans into securities is one of the financial innovations most deeply implicated in the financial crisis. It is not only closely associated with the explosive growth of sub-prime mortgages and credit derivatives but responsible for transforming the U.S. financial structure from a system based on prudent bank lending to one based on highly speculative securities markets. The creation of a market for mortgage--backed securities came about as a response to the banking crisis of the inflationary 1970s. Lending institutions were making 30-year fixed-rate mortgage loans but financing them with short-term deposits at newly deregulated market interest rates. As inflation increased, banks lost money on their mortgage portfolios. In response, Congress called on the government-sponsored secondary mortgage-market enterprises (known as GSEs) -- Ginnie Mae, Fannie Mae, and Freddie Mac -- to support savings institutions and small banks by buying their low-interest-rate mortgages. At...