What Is Securitization? And for What Purpose? – Article by Steven L. Schwarcz

In Re: Defining Securitization, Professor Jonathan Lipson attempts to define a “true” securitization transaction, ultimately characterizing it as “a purchase of primary payment rights by a special purpose entity that (1) legally isolates such payment rights from a bankruptcy (or similar insolvency) estate of the originator, and (2) results, directly or indirectly, in the issuance of securities whose value is determined by the payment rights so purchased.” There is much to admire in Lipson’s attempt but also much to question.