The mortgage...

why.

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

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 want to funnel more and more money in here.

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 .

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

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

And that caused housing prices to go up.

Well I have the original mortgage on my house.

OK, so now we're in an interesting situation.

I suffered from my mortgage loan.

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

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 .

Maybe a billion of these are a loan from bank B.

You're assuming interest only loans.

So, each of these is an investor.

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

So what just happened?

And I'll show in a future video that the only reason why housing prices did go up is that it just became easier and easier and easier to buy a house.

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.

It really started from the destruction of the idea that the government is there because it's our government, meant to protect the larger public interest.

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

I am right now thirty four years old and

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

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.

Then we saw that could create a whole chain of events.

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.

And I think that kind of common wisdom comes out of the notion of, when you have a mortgage or when you borrow money to live in a house, every month that money that you give to the bank is kind of going into savings.

We create financial markets that are super complex.

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