The Basic Functions of Asset Securitization with the Inspiration from U.S. Sub-prime Mortgage Crisis

In the sub-prime mortgage crisis,the basic functions of asset securitization products,represented by mortgagebacked securitization and its derivatives,have made immeasurable impacts on the crisis's emerge and transmission. The paper deeply discusses the economic influence of asset securitization in enlarging liquidity and transferring risks,the two basic functions of asset securitization,and proposes the suitable development pattern of asset securitization in China. First,on-balance-sheet pattern is more suitable for China to develop asset securitization in an initial stage. Second,credit rating agencies based on supervision permission system should be established,and the credit and quality of basic assets must be strictly examined. Third,the supervision on the balance sheets of asset securitization issuers should be strengthened. Fourth,related le-gal system fit for China should be established as soon as possible to effectively circumvent systematic risk. The above mentioned measures will promote asset securitization to service China's financial reform and development.