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Politics : Formerly About Advanced Micro Devices
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To: TimF who wrote (423085)10/7/2008 1:06:56 PM
From: TigerPaw  Read Replies (1) of 1572408
 
If the original mortgages where less questionable,

The way you get banks to not write questionable mortgages is to rate those mortgages lower, therefore they generate less interest return. The fake insurance policies artificially inflated the ratings of risky loans.

The mortgage companies were doing just what the market asked of them. They supplied a product that was in great demand. It was the fake insurance that caused the demand to be greater than it would otherwise be.

There was an alternative to the insurance, the mortage companies or the security bundlers could have had their own capital reserves to cover losses. This would have also begun to reduce demand for this class of loan. Instead, becasue of a lack of regulation, nobody kept capital reserves for potential failures.

TP
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