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Business, 06.05.2020 07:22 DanielleSalv

There were many causes that contributed to the financial crisis of 2007–2008. Which of the choices most accurately describes the role of securitization in contributing to the crisis? Globalization has increased the connectedness of the major economies of the world. Correspondingly, there has been a decrease in the economic security of the U. S., where the U. S. has been adversely affected by the many European nations that have suffered recessions. In providing aid to firms that were at risk of becoming insolvent, the U. S. government securitized these firms. In the future, firms are more now likely to engage in risky investments since the government securitizes these behaviors. Banks bundled mortgages together and then sold them on the market as a financial asset. However, the risk level of these securitized assets was often much higher than the purchaser thought. Banks failed to securitize their loans by requiring sufficient down payments from home buyers. This resulted in small declines in housing prices causing many homes to go into foreclosure.

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