TAILIEUCHUNG - Riding the Waves of Culture Understanding Diversity in Global Business 3E_4

Tham khảo tài liệu 'riding the waves of culture understanding diversity in global business 3e_4', kinh doanh - tiếp thị, quản trị kinh doanh phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | A Failure of Capitalism a way that the top tier would get a triple-A credit rating from a credit-rating agency based on the perceived unlikelihood that so many of the mortgages in the pool would go into default that the lower tiers could not absorb the entire loss. Sometimes more than one tier had a triple-A rating but Ill ignore that detail. This meant that the top tier of a mortgage-backed security could earn a triple-A credit rating even if it was backed by few or indeed no prime mortgages. For the smaller the top tier the more defaults there could be before there was not enough value in the entire pool of mortgages backing the security to satisfy the claims of the top tier s owners. Conventional banks tended to buy the top tier in each mortgage-backed security while nonbank financial intermediaries being willing to bear greater risk tended to buy lower tiers. Many of the purchasers made assurance doubly sure they thought by purchasing credit-default swaps a form of insurance that I ll discuss shortly. The housing bubble that began in the late 1990s though it was not of uniform magnitude geographically was so widespread that geographical diversification did not reduce the overall risk of mortgage defaults sufficiently to avert a calamitous fall in the 52 rhe Crisis in Ranking value of the mortgage-backed securities when the housing bubble burst. The fall in housing prices and the rise in defaults and foreclosures which had been as one would expect at a low level when prices were rising were so steep that even triple-A tiers of mortgage-backed securities soon traded at less than half their estimated value. The geographical diversification produced by securitization had some effect in mitigating the financial crisis that securitization by loading up the banks balance sheets with assets that turned out to be exceedingly risky had helped produce. The fall in housing values and the resulting surge of defaults and foreclosures have been concentrated in states like .

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