Countrywide Financial and Bear Stearns got into trouble because of their daily need for short term loans for which they used mortgage-related securities as collateral. When other banks decided that the collateral was not worth the risk, they stopped lending to them. Why were they able to survive and thrive doing this before any problems appeared? What were these problems?
Countrywide Financial and Bear Stearns got into trouble because of their daily need for short term loans for which they used mortgage-related securities as collateral. When other banks decided that the collateral was not worth the risk, they stopped lending to them. Why were they able to survive and thrive doing this before any problems appeared? What were these problems?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Countrywide Financial and Bear Stearns got into trouble because of their daily need for short term loans for which they used mortgage-related securities as collateral. When other banks decided that the collateral was not worth the risk, they stopped lending to them. Why were they able to survive and thrive doing this before any problems appeared? What were these problems?
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