4 ms·

I thought 2008 was because 'D' grade mortgages were repackaged into 'AAA' grade securities. When the 'D' grade folks missed payments and defaulted, it brought

• Finnucane 4y ago
  That was one factor. There was no single cause, but a fragile interconnected web of factors. But yes, subprime loans were carved up and repacked in a way to make them look like AAA bonds. The banks that created these bonds knew that the loans in the bonds were crap; they knowingly lied to investors about it. The ratings agencies stamped all the bonds without any due diligence. Other banks piled on more derivative products on top of those bonds, essentially gambling on whether those bonds would go bad. There was a slime-trail of fraud, laziness, and greed all the way back the original loan itself.
• yardie 4y ago
  2008 was a lot of 'AAA' grade securities not being able to find a greater fool to keep the profit train running. A lot of financial instruments were basically repacking and reselling loans with a bit of interest on top. Once there were no more new buyers it was a cascade of margin calls. Subprime was a very small cause of the GFC but it was the tipping point that brought the house down.