What did the investment bankers do?
They bought the mortages of their newly aquired commercial banks thus eliminating risk for their commercial banking departments. This meant that C. banks were in the black straight away again and therefore had not reason to be prudent anymore. Valuers who took a percentage of the houses they valued had every reason to hype the prices of the houses and since banks had not more incentive to be prudent began to loan to people without properly assessing the capability of borrowers to pay back the loan. In fact mortgage brokers went as far as encouraging people to lie about their income so he could get a higher percentage in pay. What happened with those mortgages? They were bundled and sold on to pension funds and other investment companies as Asset Backed Securities. Promoted as save, low risk investments and they were bought by the millions by unsuspecting naïve and ignorant investors looking to buy save and long term yielding investments to protect pensions and other mom and pop investm
