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Was there some incentive from government then, was there some kind of deregulation or some other kind of regulatory change? Why would this subprime lending begi
by Someguywhatever 8y ago
Was there some incentive from government then, was there some kind of deregulation or some other kind of regulatory change? Why would this subprime lending begin in the first place do we know?
- mikeash 8y agoSubprime is a great way to make money if you can manage the risk. Before the crisis, people figured out that if you bundled a lot of them together and sliced up the bundle in clever ways, you could shuffle the risk around and manage it better. People who wanted riskier assets could get them, and people who wanted safer assets with lower returns could get them too. Except this only works if you actually evaluate the risk correctly. If you underestimate the potential for large-scale default due to, say, a sudden drop in house prices, then everything gets screwed up, and people who bought “safe” assets suddenly find themselves losing their investment.