Wall street to the rescue

Wall street to the rescue - o Wall street to the rescue:...

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o Wall street to the rescue: new financial products Collateral debt obligations: the mortgage backed security Derivatives: the credit default swap, AIG, and Goldman sachs Insurance policy on another type of security, buy a mortgage backed security, then buy a credit default swap to ensure your invest in case it defaults. Value is derived from the MBS AIG sold the most credit default swap, made lots of money The problem of risk assessment and regulation Unable to keep up with a deregulated sysem No one understood enough to assess the risk The crisis of 2008 o The bubble pops, interests rates rise and the sub-prime market collapse Crisis begins in the sub-prime mortgage market Adjustable rate mortgages Payments double and ppl begin to forclose on their houses Foreclosures – can’t afford to pay mortgages anymore Toxic assests – no one knew the value of assests o The first casualty: bear stearns Calapses overnight, hopelessly overexposed to sub-prime mortgage
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Wall street to the rescue - o Wall street to the rescue:...

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