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Job Market Paper: “Securitization and Moral Hazard: Evidence from a Lender Cutoff Rule ” with Ryan

By Alex Kaufman, Lawrence F. Katz, David I. Laibson, Paul S. Willen and Claudia Goldin


Abstract: A popular explanation for the recent rise in mortgage default is that securitization led to lender moral hazard. According to the story, lending banks that could easily resell loans to (possibly naive) securitizers had little incentive to carefully screen potential borrowers. Some research has supported this view by exploiting what appear to be credit score cutoff rules used by securitizers. In this paper we argue that the cutoff rule evidence has been misinterpreted and is in fact consistent with an equilibrium model where all actors are rational and lender moral hazard is avoided. Even withou

Topics: Armendariz. Teaching Assistant. Executive
Year: 2010
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