PO232 Lecture Notes - Lecture 11: Periphery Countries, Alan Greenspan, Neoliberalism
Document Summary
Sub-prime loans and securitization: lending to people/families who wouldn"t ordinarily qualify for a mortgage, it might be b/c they didn"t have enough downpayment, or who didn"t have enough income, ninjna no income, no job, no assets. These people have nothing which raises question why bank would lend them something: reasons why . It wasn"t going to be their problem (moral hazard problem) So even if it goes back to gov"t or whatever, they can still get something. Became dif cult to tell how much different nancial institutions had. Info in american nancial system seized up; everyone became freaked out to lending to anyone (uncertainty) Even what seemed like safe nancial institutions found it dif cult to get. Wednesday, february 7, 2018 credit (fear: leverage. Institutions were highly leveraged; they borrowed money from others to bet and speculate on securities esp. mortgaged backed ones.
