Alright, we put our hands up, we’ve been reading Zero Hedge.
His Anonymous Handsome Midriffness is busy being his usual self, and on this topic he’s made us go hmmm about a certain Wall Street Journal story concerning SecondMarket Holdings, Inc. The platform is launching a service that will allow lenders to sell exposure in student loans to (accredited) investors. The WSJ describes it thus (emphasis ours):
Investors registered through SecondMarket already can trade student-loan securities they hold in their portfolios, said Mr. Silbert. Since 2008, about $6 billion worth has traded on the exchange, he said.
The new platform will allow lenders to issue securities directly to SecondMarket’s base of more than 100,000 investors, including institutions and affluent individuals who qualify as so-called accredited investors by the U.S. Securities and Exchange Commission.
Issuers will be able to sell securities backed by private student loans, which aren’t guaranteed by the federal government, as well as older federally backed student loans known as Federal Family Education Loan Program (FFELP) loans. They also will be able to distribute servicing reports through the new platform, said Mr. Silbert.
Conspiracy hat firmly secured, Zero Hedge’s Tyler Durden relates this to Goldman’s Abacus structure in an effort to point out that the SecondMarket platform will be another way for student loan issuers to offload risk to yield-seeking investors. His Anonymousness also notes that the trading may aid further price discovery in the asset class — albeit with more drama than how we’re putting it.
Of course the very, very interesting thing would be if the platform, or some extension on securities issued on it, allowed shorting by anyone other than the issuer of the student loans. If that ever happened, well, game on.
Another layer of complication to chuck onto one’s plate of structured student debt, and watch out of the corner of one’s eye.
Reach for Yield: Student-Loan Version – WSJ
Having toilet-papered a tree, students move on to trash ABS market – FT Alphaville