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

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

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.

And that caused housing prices to go up.

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

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

Well I have the original mortgage on my house.

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.

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

We all have heard of it.

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

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 is really the tip of the iceberg.

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

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.

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.

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.

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.

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.

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

Tom got a loan from the bank.

But anyway, all of these people said, why do I keep working so hard, being an indentured servant to this mortgage?