Let's go back to the financial crisis and the practices that brought this country to its knees. Banks developed a fancy scheme whereby they absolved themselves of all risk from the loans they made. They simply wrapped them up in a bundle and sold them to someone else. What they were doing is essentially packaging and reselling "junk."
When the news of how bad things were became known, the markets froze and collapsed. No one knew who had which securities, and if they did, they didn't know their true value.
Three years later we still have the fallout from the meltdown. For example Allstate (ALL) is suing Bank of America (BAC) for misrepresentation of mortgage investments they sold, as reported in Fortune.
There is a provision in the 2010 Dodd-Frank law that requires banks to retain some "credit risk." That means that they must keep a portion of their loans on their books and assume the responsibility if they go bad. One voice of reason is from John Gibbons of Wells Fargo (WFC) who said that banks should retain some credit risk.
As you might guess, banks want no part of sharing credit risk. Bank of America is lobbying strongly against the practice. Banks argue that "securitization" lets them free up more money for new loans. We know from what happened during the meltdown that banks used the new money to further speculate and gamble in the markets, taking huge risks that backfired and the U.S. Federal Reserve had to bail them out.
The argument boils down to this: Do want our banks to take some "risk retention" or do you do you want business as usual with banks packaging and reselling their loans, absolving themselves from taking any losses for their mistakes?