1. Why was the market for sub-prime mortgages sustainable from 1996 to 2005? Explain how this changed...
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1. Why was the market for sub-prime mortgages sustainable from 1996 to 2005? Explain how this changed in 2006.
2. The credit ratings agencies were paid by the companies who had been heavily involved in the market for sub-prime mortgages. Explain why this presents a moral hazard.
3. Financial regulation has endowed the judgements of the three credit ratings agencies with legal backing and has protected them from competition. Explain why this presented a problem in the process of securitisation.
4. If you were set the task of preventing similar sub-prime issues in the future, what regulations would you put in place?
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