The process of pooling various types of debt (mortgages, auto loans, credit card debt) and selling them as consolidated securities to investors. This transfers risk from the original lenders to investors and creates liquidity.
From 'security' (from Latin securus, meaning safe) plus suffix '-ization' (meaning the process of making). The practice began in the 1970s with mortgage-backed securities and expanded rapidly in the 1990s and 2000s.
Securitization is like making a smoothie from different fruits - you blend thousands of individual loans into one investment product, but just like a smoothie, if some of the ingredients are rotten (subprime mortgages), the whole drink can be toxic!
Complete word intelligence in one call. Free tier — 50 lookups/day.