Question
One example of financial intermediation is the selling of mortgages by banks to a third party. If you borrow money from the Bank of America
One example of financial intermediation is the selling of mortgages by banks to a third party. If you borrow money from the Bank of America to buy a house, the bank immediately sells your mortgage to a third party like Fannie Mae. This transaction gives Bank of America the cash to make another mortgage. Fannie then holds your loan along with millions of others they have bought, and they use the loans as assets to serve as collateral, so they can borrow money in the financial markets to buy more loans from Bank of America and other lenders. What is the impact of all this activity on the cost and availability of mortgages? What if any pitfalls do you see in the process? On balance, is it good or bad for society? Why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started