If nobody can sell mortgage-backed securities based on trillions of dollars of unpayable instruments, there's a lot less risk in the overall system.
Interpretation
Elizabeth Warren suggests that reducing the ability to sell unpayable mortgage-backed securities decreases the overall risk in the financial system.
Elizabeth Warren highlights a critical issue in the financial sector, where the widespread sale of mortgage-backed securities composed of unpayable debts poses a significant risk to the economic system. By eliminating or restricting the trade of these financial instruments, the overall stability and security of the financial system can be improved, thereby protecting investors and the economy from potential crises.
In practice
This quote can be used in a finance class to discuss the importance of risk management.
Families rely on financial services more than ever, but those who need them most - who struggle to make ends meet - too often must contend with sky-high interest rates and tricks and traps buried in the fine print of their loan products.
There's been such a sense that there's one set of rules for trillion-dollar financial institutions and a different set for all the rest of us. It's so pervasive that it's not even hidden.
Mitt Romney is the guy who said corporations are people. No, Governor Romney, corporations are not people.
I talk to nurses and programmers, salespeople and firefighters - people who bust their tails every day. Not one of them - not one - stashes their money in the Cayman Islands to avoid paying their fair share of taxes.
'Middle class' used to be synonymous with secure, with steady, with boring, because middle-class people were people who were pretty much safe from the time they first started work on through retirement and until their deaths. No longer.
Does anyone believe that Goldman Sachs is gonna give up a deal that would yield millions of dollars because someone fussed at them behind closed doors?
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
There is no more reason to believe that Bitcoin will stand the test of time than that governments will protect the value of government-created money, although Bitcoin is newer, and we always look at babies with hope.
We tend to focus on assets and forget about debts. Financial security requires facing up to the big picture: assets minus debts.
A mortgage casts a shadow on the sunniest field.
We need a mutual fund industry with both vision and values; a vision of fiduciary duty and shareholder service, and values rooted in the proven principles of long-term investing and of trusteeship that demands integrity in serving our clients.
The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.
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