Answer: Securitization makes originating banks approve and monitor loans carefully.

## Explanation Option A is **not** a consequence of securitization. In fact, securitization can create **moral hazard** where originating banks have less incentive to carefully approve and monitor loans because they transfer the default risk to investors through securitization. **Analysis of each option:** - **Option B**: ✅ Correct - Securitization does transfer default risk from the originator to investors who purchase the securitized products. - **Option C**: ✅ Correct - By transferring risk and freeing up capital, securitization can enable originating institutions to offer lower interest rates. - **Option D**: ✅ Correct - Securitization creates new investment vehicles that allow institutional investors to gain exposure to asset classes they might be restricted from holding directly. - **Option A**: ❌ Incorrect - This is actually the opposite of what happens. Securitization can reduce the incentive for careful loan monitoring (the "originate-to-distribute" model), which was a contributing factor to the 2008 financial crisis. **Key Concept**: The "originate-to-distribute" model in securitization can create misaligned incentives where loan originators focus on volume rather than quality, since they transfer the credit risk to investors.

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