Or they might even start to buy things that aren't Treasuries.

The mortgage...

So right here are a whole bunch of people's mortgages.

Most of the loans we're familiar with in our personal

Let's say it's um let's say its 10 billion of commercial mortgages.

So let's think about how we manage our money.

why.

And that caused housing prices to go up.

Well I have the original mortgage on my house.

I suffered from my mortgage loan.

You're assuming interest only loans.

This is really the tip of the iceberg.

It's only worth 100,000 now.

Let's say I'm some type of the Investment Bank.

We all have heard of it.

Well everyone knows that it's not going to be exactly 10 .

I am right now thirty four years old and

So, each of these is an investor.

What does it mean, derivative?

Now what are my liabilities?

But for the simplicity of this argument,

Right?

Remaining mortgage on the home, 1 07,000.

They sell it to Bear Stearns.

Your address in Brooklyn, the payments on your mortgage, how long you've been a member of the NYPD.

And when they default, what is kind of the recovery?

So I'll just draw it down here.

We even bought our old house, assuming that we'd never have to pay the mortgage in full.

And why does that matter?

So let's say I have another group of assets.

Can I go out there and I buy a whole bunch of mortgages.

I paid off the mortgage when I got my promotion.

You know, we take out these loans to buy houses.

So I stick them all inside of that.

But maybe that's not enough. Maybe the economy is still tanking.

And for the sake of simplicity, I'm going to assume that the loans in this presentation are interest only loans.

I've essentially become the lender to the home owner, and so the home owner's morgage payment will now come to me the Investment Bank .

But Countrywide would say, well, we're already giving mortgages to all the people who qualify.

We create financial markets that are super complex.

We would pump more and more money into Fannie and Freddie Mac.

We would lower standards on what it took to get a mortgage.

Imran's no dummy, so he does the same thing. He raises his price to 2.

So times a million, right?

So I want to funnel more and more money in here.

You'll sell the house and you'll pay it off, even though you can't pay the mortgage anymore.