How can mortgage-backed securities bring down the U.S. economy?
In 2008, the United States teetered on the brink of financial disaster. Unemployment looked to reach its highest levels in two decades [source: Boston Globe]. Homeowners defaulted on their loans in record numbers. Enormous investment banks that had been in business for more than a century and had endured the Great Depression faced collapse. The economy, in other words, was circling the drain. And all of it, every last part of this looming economic disaster, was due to a unique financial instrument called the mortgage-backed security. Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A
