Things you should know about the Financial Crisis and the documentary

Things you should know about the Financial Crisis and the documentary

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Things you should know about the Financial Crisis and the documentary “Inside Job:” What is the “security life cycle” for a mortgage-backed security (MBS) that is described in the documentary? The security lifecycle is the process of creating and selling CDO’s to investors. The first step is a homeowner taking out a mortgage on their home. The lender then sells their mortgage to an investment company. That investor company bundles a group of mortgages in CDO’s, which they in turn sell to worldwide investors. This is very controversial because it doesn’t really make sense to pass bad debt on. o Do you think that Investment Banks should be allowed to sell CDO’s? Why or why not? I do not think that Investment Banks should be allowed to sell CDO’s because it is essentially passing your own risk onto someone else. Especially during a time such as right now when the economy is in distress and the risk is much greater. Explain how a CDO that consists entirely of sub-prime mortgages could nevertheless be given a AAA (investment-grade) rating given the low probability of a nationwide housing slump. Sub-prime mortgages were given a AAA investment ratings given the low
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Things you should know about the Financial Crisis and the documentary

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