History 1807 Lecture Notes - Lecture 9: Robert Rubin, Wall Street Crash Of 1929, Alan Greenspan
21 Apr 2016
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Credit default swaps used to ensure against series of loans/debts on books too much burden on book that prevented them from using their capital reserves. Off load debts to 3rd party swap away risk. Have investors hoping for failure of mortgages b/c then can collect insurance. Belief that this is safe because: most of debt has seal of approval of freddie, fannie and ginnie people still under. October 2, 2014 impression still vouching for these privatized companies: rating agencies rating triple a operating under old fashioned assumptions. Pension plan investors and funds: gov"t sitting by and encouraging it. Economy going too well and investments going too high. This system is encouraged by a series of financial reforms: In 1999 glass-steagall act (1933), which had split commercial and investment banks, is repealed. Too many commercial banks taking savings from customers and investing in wall street. Needed division between people with money (investment banks) and people without (commercial banks)
