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2) When mortgage backed securities was first adopted, it was believed that the instrument would help reduce banks' maturity mismatch and hence the possibility of
2) When mortgage backed securities was first adopted, it was believed that the instrument would help reduce banks' maturity mismatch and hence the possibility of banking crisis. Explain the logic behind the argument. However, economists now believe mortgage backed securities had contributed to property inflation in the US before the sub-prime crisis. Explain. (10 marks)
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