Excessive borrowing under too loose credit standards is one of the characteristics of the
US mortgage bubble.
Credit flooding has led to a large number of subprime mortgages
(
subprime loans
), and investors believe that these high-risk loans will be mitigated
by
asset securitization
.
The damage caused by the failed asset securitization plan swept the housing market
and its enterprises, and then A
subprime mortgage crisis has
triggered.
This crisis has
caused a larger number of silver masters to be sold by banks in the market.
The supply
of these excess homes has caused the prices of surrounding houses to fall sharply,
making them vulnerable to auctions or abandoned by the courts.
This result has laid the
foundation for the future financial crisis.
Initially, the affected companies were limited to companies that were directly involved in
building and subprime lending,
Then, the crisis began to affect ordinary credits that were not related to real estate, and
in turn affected large financial institutions that were not directly related to
mortgages.
Most of the assets owned by these institutions are derived from the benefits
associated with mortgages.
These securities, which are mainly subject to credit loans,
or
credit-derived goods
, were originally used to ensure that these financial institutions
are free from bankruptcy.
However, due to the subprime housing credit crisis, members
affected by these credit derivatives have increased, including
Lehman Brothers
.
Failures of corporate governance and risk management at many systemically
important financial institutions are among key causes of the crisis, as concluded by
the Commission.
Many large financial institutions took on significant amounts of risk with limited
capital and a large dependence on short-term funding. These institutions
increasingly focused on risky activities that would result in large payoffs, such as
acquiring and supporting subprime lenders in creating and selling trillions of dollars
in mortgage-related securities. Additionally, mathematical models were over-relied
