[quote=dumbrenter]
I do not get what you mean by double counting debt.
Say I, as a homeowner take on mortgage to buy a home. I am in debt to the bank and it shows up on the asset side of the bank. If the bank sells my debt off to financial companies or GSEs, then I am still the debtor while the financial companies become the creditors. What I owe them will be listed on the asset side of their balance sheet.
Not a financial expert, but am I missing something in this example?[/quote]
Yes, you are missing something. And so was I. The bank or whatever lender you used sold the debt to either one of the GSE, or in the private mortgage market. They, in turn, collateralized it, creating new debt. So both you and the buyer of your loan both owe the same money. Forty years ago, the bank loaned you the money and most often kept the loan. After thinking it through, its not that different. The bank mostly used depositors money, not equity, to make the loan. It’s slightly different, the bank did have some equity in the loan. But nowhere near 100%, so it partly resulted in doubling the amount of debt then too.
