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

The mortgage...

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

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

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 I need to borrow 750,000.

And that caused housing prices to go up.

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

But there wasn't actual aggregate savings going on.

Well I have the original mortgage on my house.

why.

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

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

I suffered from my mortgage loan.

It's only worth 100,000 now.

We all have heard of it.

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 .

This right here is the debt, or essentially the principal payment on your mortgage, or how much do you owe to the bank.

You're assuming interest only loans.

So, each of these is an investor.

So you have to save up 15,000.

This is really the tip of the iceberg.

What does it mean, derivative?

But for the simplicity of this argument,

Remaining mortgage on the home, 1 07,000.

I am right now thirty four years old and

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

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

Now what are my liabilities?

Right?

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.

So I stick them all inside of that.

They sell it to Bear Stearns.

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

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

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

So I'll just draw it down here.

So times a million, right?

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

And let's say on that house unfortunately, I don't own it outright.

I'll do kind of a more complicated one.