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I am reading an article and became confused with this part: "The traditional banking model, in which the issuing banks hold loans until they are repaid, was replaced by the 'originate and distribute' banking model, in which loans are pooled, tranched, and then resold via securitization." I thought banks always did this. If the above statement is true, does anyone know where I can find evidence for it?

  • Are you reading page 94 of "A Tale of Two Crises: A Mutidisciplinary Analysis"? books.google.com/… – RonJohn Oct 13 '17 at 23:58
  • If what above statement is true? That the banking has evolved since the invention of banking? Yes, it's a semi recent change that banks securitize and resell loans and earn money on the origination. investopedia.com/terms/l/lewis_ranieri.asp – quid Oct 14 '17 at 0:06
  • @RonJohn I'm actually reading the source of that quote, the article "Deciphering the Liquidity and Credit Crunch 2007-2008" by Markus K. Brunnermeier. – Tomás Palamás Oct 14 '17 at 0:09
  • @quid This statement, "The traditional banking model, in which the issuing banks hold loans until they are repaid, was replaced by the 'originate and distribute' banking model, in which loans are pooled, tranched, and then resold via securitization." So from the link you posted, is Lewis Ranieri the one who started the "originate and distribute" banking model? – Tomás Palamás Oct 14 '17 at 0:12
  • He is the one who is credited with it, yes. – quid Oct 14 '17 at 0:12
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https://www.newyorkfed.org/medialibrary/media/research/epr/12v18n2/1207bord.pdf

Page 1, column 2:

The syndicated loan market rose from a mere $339 billion in 1988 to $2.2 trillion in 2007, the year the market reached its peak.

From this, we can see that it started in the 1980s.

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