History 1807 Lecture Notes - Lecture 7: Stock Market Bubble, Takers, Credit Default Swap
13 Oct 2016
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Late 60s, early 70s, 3 entities capable of buying mortgages from the banks (fannie, freddie, Very lucrative for fannie, fannie and freddie are huge and profitable. Because real estate is a sure thing . People made money investing in real estate because until 70s/80s, people don"t default on mortgages. Wait a minute wall street wants to join the fun. 1984, reagan admin passes secondary mortgage market enhancement act. Permits wall street banks to securitize their own mortgages and sell them, just like fannie and freddie. Banks on wall st. now going to be buying mortgages from banks this will lead to some form of speculation. Local banks now have a huge incentive to hand out mortgages to anyone, because now there is no risk to them (with wall street as well as fannie and freddie) Very little giving banks incentive to do due diligence and make sure they"re giving out good loans.
