Mortgage companies make loans and then sell them into the secondary market, freeing up capital to make more loans.
The banks then boost their earnings by selling the risk-free portion of the loans on a secondary market.
With less paper in the immediate offing, accounts bid up seasoned loans in the secondary and enthusiastically subscribed new syndications.
FORBES: Leveraged loans return 1.16% in July, trailing other asset clases; 5.75% YTD
Beal mostly buys loans on the secondary market instead of originating them.
We just announced some changes, for example, in the ability of the student loan market -- the secondary market of securitized student loans to be purchased in such a way that we can reduce the interest rates on student loans for everybody.
In March, it launched a Secondary Market facility for trading P2P loans.
FORBES: Crowdfunding In Europe: The Top 10 'Peer-to-Peer' Lenders
Portfolios of shares are easy enough to value, as are loans that trade on a secondary loan market.
During the slumps the economy is vulnerable to what Austrians termed a "secondary deflation, " where banks call in loans and are stingy about extending credit.
If a lender makes a mortgage loan, he or she can repackage that obligation with other loans and sell it on the secondary market to reduce the risk.
One explanation is that, as bank loans begin to trade in the secondary markets like ordinary bonds, the banks themselves are less interested in preventing borrowers from imploding than when they kept the debt on their books.
But now there is a vigorous secondary market for jumbo mortgages that could easily soak up the smaller loans dominated by Fannie Mae and Freddie Mac.
ECONOMIST: The mortgage giant loses its boss and looks for capital
Turning from the secondary to the primary, this graph details new-issue volume for both leveraged loans and high-yield bonds.
FORBES: November 2012, European Leveraged Loan Market Analysis
But although the secondary market for mortgages is well developed, there is nothing comparable for small business loans in poor areas.
In all these events the claims of scholarship were always secondary to those of national or local pride, and national museums were usually reluctant to make loans.
In the United States, where loans for university students are packaged and sold as securities guaranteed by the government, much post-secondary education is already financed in this way.
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