Running Head: 2008 FINANCIAL CRISIS12008 Financial CrisisNameInstitutional AffiliationDate2008 FINANCIAL CRISIS2Question 1: sub-prime mortgage-backed securities defaulting and Credit DefaultSwapsI view both the sub-prime mortgage-backed securities defaulting and Credit DefaultSwaps as having contributed greatly to the financial crisis of 2008. The reason why the subprime mortgage-backed securities defaulting increased was due to a decision by Federal Reserveto lower the rate of federal funds. I feel that demand for mortgages increased as well as reducingthe likelihood of repayment. Institutions issued out many mortgages regardless of the creditworthiness of the borrower hence loans were likely to go into default. Because of the high riskinvolved, lending institutions were forced to increase interest rate 12 times three years before thecrisis. They feared that the de ...
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