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Unformatted text preview: ks Short Term Rates might Exceed Previous Loan Rates (most likely due to inflation) Savings & Loan Crisis of 1980's 1,300 Failed Banks, Cost FDIC over $300b Texas Tech University 10 Lesson 9: Origination and Sec. Markets st 11 Deposit Loans Individuals Businesses Government Interest Notes Individuals Businesses Government 12 4 Real Estate Fundamentals Dr. Eriksen FLOW OF FUNDS SEC MARKETS Financial Intermediaries Surplus Income Units Deficit Income Units Mortgage Banker Secondary Mortgage Market Advantages of Secondary Market Provide Liquidity to Lenders Allow Banks to Make More "Good" Loans even if they out number deposits Specialization of Skills Divide Tasks Thru Comparative Advantage Diversification of (Geographic) Risks Pool Risks From Multiple Borrowers Sell "Tranches" of Risk to Highest Bidder Texas Tech University 13 14 Lesson 9: Origination and Sec. Markets Deposit Loans Individuals Businesses Government Interest Notes Individuals Businesses Government Securities Mortgage Loans 15 5 Real Estate Fundamentals Dr. Eriksen Les...
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- Fall '08