Residential mortgages historically carried a capital requirement of 4 percent. Why did these mortgages, bundled as part of the mortgage-backed securities issued by investment banks, turn out to be far more risky during 2006-2010 than had previously been the case? Investment banks leveraged these mortgage-backed securities more than was allowable under SEC rules. Rating agencies miscalculated the historical risk of traditional fixed-rate residential mortgages. Lower mortgage lending standards increased the likelihood that defaults would occur. O Investment banks held too much capital relative to these mortgage-backed securities