The second half of the following sentence clears it up:
> The analogy is less about providing visibility into the contents of pipes (though mortgages must do that) and more “highly specialized manufactured widget that the entire world sits downstream of.”
No. Why use "widgets" and "electronic flow meters" as analogies? The average person knows even less about those than mortgages.
Here's my attempt:
Mortgages are not primarily a service that a bank provides to homeowners. They are akin to a farmer growing crops to sell to a food processing company. The food processing company (like institutional investors) doesn't want to deal with the complexities of farming (like dealing with individual homeowners). Instead, they prefer to buy large quantities of raw produce (bundles of mortgages) and process it into packaged food products (guaranteed cashflows). Just as the food processing company focuses on producing and selling packaged food rather than farming, pension funds focus on managing payouts to retirees rather than issuing individual mortgages. Banks, like farmers, have to grow (originate) the raw product (mortgages) to sell it in bulk to these large institutions, thus transforming the upfront cash into a steady stream of future revenue.
