Question
According to Paul Davidson, in Chapter 9, Financial markets, fast exits, and great depressions and recessions , shadow banking evolved as non-bank financial intermediaries created
According to Paul Davidson, in Chapter 9, Financial markets, fast exits, and great depressions and recessions, shadow banking evolved as non-bank financial intermediaries created securitized assets that they claimed were nearly as good as money because they were so liquid and stable in value. Such claims were made with respect to the derivatives created from subprime mortgages. In reality, it was next to impossible to determine the true value of the assets and in 2007-8, mortgagees began to default. Why did the mortgage originators have an incentive to approve people for those loans and why did they not care too terribly much whether or not they defaulted?
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