Banking Industry & the Mortgage Issue

Discussion in 'Economics' started by stockinvestor, Sep 1, 2008.

  1. Hi,

    I'm just wondering, due to some stocks that I've been a long time investor on. I heard the "subprime" non-performing mortgage situation was worsened due to the leverage banks were able to employ in taking those mortgage positions. Thus, the write downs which was severe to begin with got much severe in scope.

    How can banks invest in mortgage securities with leverage? Who gives them those leverage? I thought they had to pay cash for them. And that banks had to keep their liquidity in check and has to hold on to a certain percentage of deposits.
  2. nkhoi

    nkhoi Moderator