No shirt, no shoes, no credit

There have been reports for a month or so of students having trouble getting private loans, mostly for things like trade school.  And of course, mortgage credit has been tight for a while.  An article in today's New York Times sketches just how widespread the collapse in securitization is:

The conduit, the market for securitization, through which mortgages and other debts are packaged and sold as securities, has become sclerotic and almost totally dependent on government support. The problems, intensified by bond investors who have grown leery of these instruments, have been a drag on the economy and have persisted despite the exercise of extraordinary regulatory powers by policy makers.

"The mortgage finance system in the United States has been badly damaged," said Anthony Lembke, co-head of investments at MKP Capital Management, a hedge fund firm that is a big investor in mortgages. "There is definitely some reinvention that will need to occur, and that will include some explicit involvement by the government."

Bond investors first stopped buying private home mortgage deals, then shunned commercial mortgages. Now, they are becoming wary of credit card debts and auto loans. In the first half, private securitizations reached just $131 billion, down sharply from $1 trillion in the same period last year, according to data compiled by Thomson Reuters.