The document discusses the subprime mortgage crisis, noting that government encouraged lenders to provide loans to subprime borrowers to boost homeownership. However, falling home prices led to increased defaults among subprime borrowers as the value of their homes declined. Many loans were then resold by original lenders to other players in the market, spreading the financial effects of the crisis and making it systemic in nature when defaults rose across the system.

4. By the
way, this
time it’s
not about
Iraq.

8. Government also encouraged
lenders to lend to sub-prime
borrowers, arguing that this
would help even the poor and
young to buy houses.

16. - House prices started falling.
- This increased the default rate among sub-prime borrowers.
- Many unwilling to pay for declining in value of their home.
- The Loan collateral is typically the home being bought.
- This increased the supply of houses for sale while lowering the demand.
- Thereby lowering prices even further and setting off a vicious cycle.

18. this become a systemic crisis . . .

19. original lenders had further
sold their portfolios to other
players in the market.

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25. What’s Next?

26. [ Any Solution ]