bunce2806

Originally posted by Kev at 2008-1-23 04:50 AM:


thank you for answering, but i ...

証券化: In short this means selling the mortgage loans to a separate company and then issuing securities (CDOs) backed up by the loans.

In the old days when banks used to just collect interest on the mortgage loans, they checked the borrowers' ability to repay very carefully.  But since some US banks thought they can make more money by securitising these loans instead of just waiting to collect interest, they no longer bothered to check carefully.  As the Moderator said (see above post), they just cared about lending more and more money, even to people who cannot possibly repay.

The bubble finally burst about Aug '07, and the economic effects just kept spreading wider.  Lots of people can't pay back mortgage loans, banks and funds that bought CDOs lost money as the mortgage loans securing the CDOs are rubbish, stock markets fell, fears of recession as people are afraid to spend money, etc etc.