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One of the big problems with those securities could be called the "Russian roulette" issue.
For instance, dodgy mortgage securities could be held with little capital against them, on the basis that credit-rating agencies had graded them triple-A.
By then, it was clear that more money funds would break the buck unless withdrawals could be reduced and the market for short-term securities could be stabilized.
The only reason subprime securities could be rated as investment-grade was because of the assumption that borrowers would be able to either sell their homes for higher prices or use the new equity to refinance.
Moreover, lenders have tightened underwriting standards across the board for both prime and subprime mortgages, making it harder for borrowers to refinance loans.There is also another way in which owners of mortgage-backed securities could be hurt.
Because bond prices and yields move in opposite directions, increased purchases of longer-term securities could be expected to drive up prices and drive down interest rates, and vice versa.
Similar(45)
But by early this decade, the mortgage could be used to secure a mortgage-backed security, and the mortgage-backed security could be used to secure a collateralized debt obligation.
Now, some believe, that hard-earned security could be lost.
Basic law enforcement and national security could be compromised.
In cases involving defence contracts, national security could be at risk.
Public sector health-workers worry that job security could be at risk.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com