33:522:334 Lecture Notes - Lecture 10: Commercial Bank, Investment Banking
15 Mar 2016
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Started in 1933 and gradually grows and blows up in 2007: 1933, borrowers are geing mortgages and homes. People are geing money from thrits, investment/commercial banks. People get a loan by going to the bank, show inancial statements/etc, and then get a loan but person must put down 50% deposit. The bank keeps that loan on their balance sheet, the risk is with the bank: 1980-2006. For a person to get a mortgage/loan, they must go to commercial bank. Government tells banks to make as many loans as possible to low/medium income households. Fannie mae says they"ll take all commercial banks" loans in exchange for a fee. Banks no longer have this on balance sheet and no risk. Now, banks don"t care about the borrower"s credit and coninue to give as much loans as possible and then sell to fannie mae. Fannie mae now has billions of dollars in loans on their balance sheet.
