Only if there is too much leverage and an poor accounting of who owns what
The Federal Reserve bought the shitty mortgage backed securities because they werent that shitty, the banks just had too many of them relative
to the size of their own assets.
Even of subprime mortgages and adjustible apr mortgages only ~7% went into default by 2008-2009
A portfolio of mortgages where 93% are going to pay vastly more interest to you than the home is worth and you still have the home if they really default? Thats a good portfolio
The banks issue at the time was that they were leveraged up 50x, and they didnt even realize they were levered up that much
so a single month of 7% defaulting could bankrupt them
While the fed has an infinite sized portfolio without leverage, and bought all the claims and let them just play out which they have continued to do. Theyre profitable, correctly performing investments.
More transparent accounting fixes the problem with re-collateralized re-securitized assets
The Federal Reserve bought the shitty mortgage backed securities because they werent that shitty, the banks just had too many of them relative to the size of their own assets.
Even of subprime mortgages and adjustible apr mortgages only ~7% went into default by 2008-2009
A portfolio of mortgages where 93% are going to pay vastly more interest to you than the home is worth and you still have the home if they really default? Thats a good portfolio
The banks issue at the time was that they were leveraged up 50x, and they didnt even realize they were levered up that much
so a single month of 7% defaulting could bankrupt them
While the fed has an infinite sized portfolio without leverage, and bought all the claims and let them just play out which they have continued to do. Theyre profitable, correctly performing investments.
More transparent accounting fixes the problem with re-collateralized re-securitized assets