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<blockquote data-quote="Ginevra Bizzarri" data-source="post: 29338" data-attributes="member: 187"><p>Hi all! </p><p></p><p>I agree with everything Edward said. To rephrase it in my own words, the issue was essentially that all the major banks had created these MBS's as well as other very complex securities like CDOs which they sold on to investors (some investors were actually other banks) therefore banks<strong> were actually</strong> holding these products on their balance sheets. On the other hand, I believe some products were complicated to such a degree (see CDOs in my article) that banks themselves did not even know how toxic they were, and thus kept them on. </p><p>On top of this, these securities were actually perceived by many as valuable (because of the skewed rating system, the fake security around the real estate market and other factors I mention in my article) which allowed banks to use them as collateral in the repo market and the short term note market. </p><p></p><p>When banks started to perceive MBS' as less valuable (essentially when people started having problems paying their mortgages and the whole thing started coming down) then these MBS' could no longer be offered as collateral. Once this happened, short term loans and the repo markets dried up leaving banks without liquidity. </p><p></p><p>By the way, I am no expert so feel free to correct me if I am wrong! <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile :)" loading="lazy" data-shortname=":)" /></p></blockquote><p></p>
[QUOTE="Ginevra Bizzarri, post: 29338, member: 187"] Hi all! I agree with everything Edward said. To rephrase it in my own words, the issue was essentially that all the major banks had created these MBS's as well as other very complex securities like CDOs which they sold on to investors (some investors were actually other banks) therefore banks[B] were actually[/B] holding these products on their balance sheets. On the other hand, I believe some products were complicated to such a degree (see CDOs in my article) that banks themselves did not even know how toxic they were, and thus kept them on. On top of this, these securities were actually perceived by many as valuable (because of the skewed rating system, the fake security around the real estate market and other factors I mention in my article) which allowed banks to use them as collateral in the repo market and the short term note market. When banks started to perceive MBS' as less valuable (essentially when people started having problems paying their mortgages and the whole thing started coming down) then these MBS' could no longer be offered as collateral. Once this happened, short term loans and the repo markets dried up leaving banks without liquidity. By the way, I am no expert so feel free to correct me if I am wrong! :) [/QUOTE]
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