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Why the Housing Market Is so F%#@ing Insane Right Now

The Breakdown

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Leverage and Financial Markets

Financial institutions began using sting c dos as collateral to obtain leverage in the market. The structure was seen as so safe that the bond ratings agency gave them a tripola rating, the same as us. When the value of c d o started falling in value, they didn't drop slowly like treasury bonds do. They dropped like a rock. So thousands of financial institutions showed up to renew their loans with their suddenly valued collateral and were refused loans on the same terms because they weren't able to make the same level of loan funds. And maybe the best way to describe it, at least in the depth of this show, is through analogy.

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