Finance.
Description
Securitization played a crucial role in the 2007-2008 financial crisis, which was one of the worst financial disasters in modern history. In simplest terms, securitization refers to the process of pooling together various financial assets, such as mortgages, auto loans, credit card debt, or student loans, and repackaging them into new securities that are sold to investors. This process allows financial institutions to offload the risk associated with these assets, freeing up capital that can be used to make new loans. In the years leading up to the crisis, there was a significant increase in the securitization of subprime mortgages, which are mortgages given to borrowers with poor credit history. Banks and other financial institutions that originated these loans were eager to securitize them, as it allowed them to offload the risk associated with these loans and make new loans without having to hold onto the underlying assets.
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