This link, http://www.fedfin.com/images/stories/client_reports/crt%200501.pdf, is to a May, 2012 FedFin paper on the future of credit-risk transfer. I know, you don’t think you care. But, as this paper shows, credit-risk transfer is a way to bring regulated, capitalized insurance or other forms of risk absorption to bear so that banks can hold more mortgages, municipal bonds and other assets key to the recovery. Major players in this sector – notably private mortgage and bond insurers – have seen damage done to their franchises as a result of the financial crisis. But, as this paper shows, the business model is fundamentally sound and, with proper management and regulatory action, could contribute to dramatic increases in affected markets.
