A few excerpts:
"Advanced nations seem to have forgotten . . . how important documenting assets and transactions is to the creation of credit. Consider that most private credit is made up not of bills and coins, anchored in bank reserves, but in papers that establish rights over the assets, equity and liabilities that guarantee loans. Over the past 15 years, however, as they package, bundle and resell securities, Americans and Europeans have gradually undermined the reliability of the records that guarantee or make credit trustworthy — the deeds, titles, liens and other documentation that establish who owns what and how much, and who holds the risks. ...
"When property is poorly documented, markets don’t get the information needed to connect assets to finance, and governments don’t obtain the data required to detect which connections have gone awry and how to fix them. This became obvious in 2008 . . ..
"The U.S. Treasury secretary created the Troubled Assets Relief Program to prevent a run on banks by purchasing the derivatives that financed the subprime mortgages. But officials realized within days that they couldn’t locate the assets or find criteria for pricing, buying and then removing them from the market. ...
"TARP authorities couldn’t locate knowledge about toxic assets fast enough because so many non-standardized types of records were scattered around the world. U.S. property and mortgage transactions records became obscured when companies were permitted to raise large amounts of financing by “bundling” mortgage loans into marketable liquid securities and recording these “derivatives” not with the traditional public registries but with the Mortgage Electronic Registration Systems, a private company whose registry reportedly holds about half the mortgages in the United States.
"These derivatives had a notional value of $600 trillion to $700 trillion — 10 times the amount of global annual production. They are still outside any property memory system."
