Risky investments and toxic assets from "summary" of Too Big to Fail by Andrew Ross Sorkin
The financial crisis of 2008 was fueled by a variety of risky investments and toxic assets that were deeply intertwined with the collapse of major financial institutions. These investments, which included subprime mortgages, collateralized debt obligations, and credit default swaps, were seen as lucrative opportunities for many banks and hedge funds in the years leading up to the crisis. Subprime mortgages, in particular, played a significant role in the downfall of the housing market and the subsequent financial crisis. These loans were often given to borrowers with poor credit histories and low incomes, making them much more likely to default on their payments. As more and more subprime mortgages defaulted, the value of mortgage-backed securities that were tied to these loans plummeted, causing widespread panic in the financial markets. Collateralized debt obligations (CDOs) were another risky investment that contributed to the crisis. These complex financial products were created by bundling together various types of debt, including subprime mortgages, and selling them to investors. The problem arose when the underlying assets in these CDOs began to default at alarming rates, causing the value of t...
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