Securitization made debt restructuring difficult, if not impossible.

Unfreezing Credit

He knows how to use the Russian government's credit line .

Mortgages are available at outrageously high interest rates.

For example, asset management, distribution, underwriting and securitization, and proprietary trading would be separated in various ways.

Securities took the place of traditional bank credits.

More relevant is the availability of loans.

First, most international bank lending was very short term.

Banks never wanted to admit to their bad loans, and now they don t want to recognize the losses, at least not until they can adequately recapitalize themselves through their trading profits and the large spread between their high lending rates and rock bottom borrowing costs.

These borrowings caused a surge in non performing bank loans in the early and mid 1990 s, when total non performing loans hit 40 of GDP.

Likewise, micro credit schemes throughout the developing world have provided finance for the poor to expand their economic enterprise, with repayment rates that are truly impressive.

Moreover, the CBR scheduled a special auction for such loans on December 15 with the total amount of the loans similar to that of Rosneft s bond issue.

Investment banks with leverage of more than 30 times their capital in early 2007 are now down to little more than ten times.

Confidence isn t built up on the basis of spending or lending alone.

Because securitization meant that banks were not carrying the risk and earned fees for transactions, they no longer cared about the quality of their lending.

The crisis was caused by the largest leveraged asset bubble and credit bubble in history.

Sudden withdrawal of credits was enough to push them to the edge of recession.

Under its capable managing director, Dominique Strauss Kahn, and distinguished chief economist, Olivier Blanchard, it has been a voice for sanity on global fiscal stimulus in the midst of much cacophony.

The ECB s easing of credit is effectively subsidizing bank lending.

In other words, issuing more SDRs would enable the IMF to finance more lending.

It revamped its loan conditions to fit the times.

However, there's no point in waiting for a drastic decline in the cost of credit for SMEs.

I wouldn't expect a significant reduction in the share of bad loans.

I have no children, no wife, no car, no credit.

Securitization, structured finance, and other innovations have so interwoven the financial system s various players that it is essentially impossible to restructure one financial institution at a time.

Securitization (and shadow banking) will be kept simple and proceed at a measured pace as a new legal and regulatory framework is built and tested.

Globalization implies that America s mortgage problem has worldwide repercussions.

This, of course, is just the story of subprime mortgages in another guise.

This may require some international credit enhancements or guarantees.

This is because the so called linking directive the regulation authorizing EU firms to import Certified Emission Reductions from CDM projects bans credits from any forestry project.

Compare this with what happened in Russia, which was denied vitally needed funds and lasting debt relief.

Credit risk is best hedged through diversification across uncorrelated credits.

Unsurprisingly, no European firm is currently interested in purchasing such credits.

Here the West helped with initial balance of payments funds and later with debt cancellation.

Keeping those loans on the books would have meant that a bank would have had to incur a large capital adequacy provision and monitor the loans performance, at a cost to itself.

Securitization avoided such costs and placed the new product advantageously with the complicity of rating agencies, which stood to profit from investors inexperience and lack of information.

Today's universities are expected to function as dispensers of credentials and engines of economic growth.

Ten years and 20 billion dollars of official debt later, indeed, Russia's economy remains a shambles.

A default would also appropriately place part of the costs of Greece s borrowing spree on creditors.

Irresponsible borrowing by governments in international credit markets requires irresponsible lending.

Some limited previous experience with mortgage modifications is not encouraging.

That means they can make more loans, giving borrowers more funds to spend.

The dubious mortgage securities are so called mortgage backed securities.

By 2008 Grameen Bank had lent 7.6 billion.

Sorry Link, I can't give credit. Come back when you're a little... mmm... richer!