HIST114 Lecture Notes - Lecture 5: Mutual Fund, High-Yield Debt, George Soros
8 Sep 2016
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Suprime mortgages and the market crash of 2008. When prices are going up, its a hot market and many people rush to buy homes. People will buy to flip and buy to live and borrow lots of money to do so. However when the housing economy flips, people default on the payments. High risk payments- loan money to people who cannot get money elsewhere for higher % - investigate before giving the loan. Banks were giving high risk loans to people who didn"t have enough credit. 5 banks in canada, 500 to 5000 banks in the us all competing. Deregulation- americans wanted less regulations on businesses, regulating holds down economic growth. Banks and mortgage companies began to compete for business - not a large down payment, six months no interest, rise after that. People lived happy for the first six months, then discovered it was too expensive.
