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The article is correct Reasons for the crush as the article mentions 1. Unprecedented Growth and Consumer Debt The role of Fannie and Freddie is to repurchase mortgages from the lenders who originated them, and make money when mortgage notes are paid. Thus, ever-increasing mortgage default rates led to a crippling decrease in revenue for these two companies. creative mortgages were a disaster waiting to happen in the event of a housing market downturn, which would put owners in a negative equity situation and make it impossible to sell
2. The Subsequent Rise of Creative Mortgage-Related Investment Products credit default swap (CDSs). CDSs were designed to be a method of hedging against a company's creditworthiness, similar to insurance. But unlike the insurance market, the CDS market was unregulated, meaning there was no requirement that the issuers of CDS contracts maintain enough money in reserve to pay out under a worst-case scenario
3. Market decline