Mortgage-backed securities were put in place to fix the last problem with the mortgage market. Which was caused by the fix put in place to fix the problem befor

Mortgage-backed securities were put in place to fix the last problem with the mortgage market. Which was caused by the fix put in place to fix the problem before that. EDIT probably too late to fix the downvotes, but Regulation Q limited the interest rate that banks could pay out. After banks had lent out their money, they couldn't raise any more, especially if interest rates were high, as happened more than once. But if they could sell off their loans to the GSE, they could get more capital back, and lend it out some more. Of course, this led to problems. But if we don't understand the psychology that led to securitization as being the natural solution to the previous column, how do you know you are being any wiser about suggesting what is going to replace securitization? (I simplify a bit, because securitization also allows banks to diversify geographically.)