Securitisation created a serious agency problem, leaving loan originators, who were paid up-front, with no incentive to avoid bad credits and every reason to piggyback inappropriate products onto good ones (in one particularly depressing tale, a retired postal worker whose mortgage is almost paid off is switched to an interest-only product that leaves him in danger of losing his home).

ECONOMIST: The credit crunch

At the same time, ever more layers of securitisation have separated the original lender or broker of a loan from the ultimate bearer of credit risk.

ECONOMIST: Assets and their liabilities

In mortgage securitisation, for instance, the lender is supplanted by the broker, the loan originator, the servicer (who collects payments), the investor and the arranger, not to mention the rating agencies and mortgage-bond insurers.

ECONOMIST: Securitisation