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Afterwards, the introduction of the derivatives (it
derives from the performance of the underlying entity) and the victory of Wall
Street to eliminate the regulations of those derivatives led to one of the
world’s most costly financial crisis. Before the securitization of the lending
market the mortgage was paid directly to the local lender, so the lender was
interested if the one who took the loan could actually pay for it. In the new
system, lenders sold those mortgages to investment banks which combined
thousands of mortgages to create complex derivatives called CDOs
(collateralized debt obligations) hence selling them to investors all over the
world. As the money went from the borrowers to the investors, it was irrelevant
for the investment banks weather they would be able to repay or not. Moreover,
banks bribed rating agencies like Moody’s, S&P and Fitch to rate the
investments as high as possible (AAA: triple-A) when in fact, the investments
were extremely risky. The part that shocked me the most is the opportunity to
secure what you actually do not own with the help of buying the CDSs (credit
default swap) from securitized companies like AIG, MBIA, AMBAC. Moreover, the
investment bank could suggest the investor to put money into the CDO knowing
that it would fail as the same bank bought CDSs to bet against that CDO. This
is a high-level fraud which was surprisingly allowed in a democratic system
like the USA. Finally, the fact of the chairmen of these financial institutions
being let to leave with a huge amounts of money without being punished even
after the bankruptcy of their own firms, indicates one more time that money can
buy anything when it comes to business and politics leading to the disaster for
everyone except the greedy ones who has actually made the mess.    


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