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As I struggle to understand all the factors that led to the current subprime mortgage crisis, I continue to be amazed, and wonder what’s lurking around the next corner. BusinessWeek reported that another contributing factor to the subprime mortgage crisis was a sort of money-back guarantee that banks offered investors. In their effort to attract conservative fund managers like money-market accounts, banks like Citigroup guaranteed that they would back certain products, plus interest, no matter what happened in the market. They used the influx of funds to finance more spending, and the cycle continued to build. It was great at the time for pumping money into the housing market, but now Citigroup is reporting that it owes about $100b for these subprime mortgage-linked securities. As I continue to read all the background that led to the subprime mortgage crisis, I can only wonder two things. One, who thought these things up, and what kind of drugs were they on that convinced them “everything will be okay,” and two, what is the next little wrinkle in this saga?
About this poster:
Posted by:
vwalker
(female, mid-30s)
(Posted 12/3/07)
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Subprime Mortgage Crisis: The Background Saga Continues
