If proper controls and due diligence are applied when doing deals, it is a great source of funding for loans. I knew of firms that were very careful what they could securitize and whom they could sell some riskier bonds to. It is when people get greedy that things go south. I think there are more guardrails in place now to make sure the history does not repeat.
I think if continue to have stringent requirements in underwriting those collaterals (SF mortgage, commercial loan, car loan, credit card, personal loan, etc) then those securitized products will perform.
Let me use an analogy to show what securitization is about. You could sell the whole cow to one buyer to get $P price, or you could take a cow cut it up into different types of meat to sell to different consumers and get $P X 1.25 price because people may pay a premium for certain cut of meat. If the cow is not of a good quality or if you misrepresent what kind of meat you are selling then you have a problem.
When you do securitization, you take loans (couple of thousands loans) with maturity date of 30 years and carve up payments to meet different investor needs. It would drive down cost of funding those loans which would ultimately benefit the consumers.
No, I don’t think it is all bad if it is done properly. The prospectus would have all info about the collateral and securities, including the best and worst returns under different economic scenarios.