As my time at the American Securitization Forum conference had nearly concluded on Tuesday, I attended a session specifically addressing the question of how the industry could better align incentives. In other words, how should things change so that issuers don't make money by originating bad loans? Like so many sessions during the conference, this one boiled down mostly to discussing whether or not it's a good idea for securitizers to keep some "skin in the game," retaining some of the risk in the pools of loans they sell. While bankers and issuers are very wary of the idea, one panelist made it clear that some investors support it. A quick refresher in case you haven't read any of the other posts I've written about the "skin in the game" proposal. The idea is that, by holding back some of the risk for themselves, securitizers would naturally have more prudent underwriting standards than the originate-and-distribute model provides. The problem is that it's a little bit unconvincing that it will help: most banks had plenty of mortgage- and asset-backed bonds in their portfolios when the mortgage market collapsed -- they had lots of skin in the game. And yet, they still originated plenty of bad loans.