$00$ There were many causes that contributed to the financial crisis of $2007-2008.$

Which of the statements most accurately describes the role of collateralized debt obligations, referred to as CDOs, in contributing to the crisis?

Banks failed to collateralize their loans by requiring sufficient down payments from home buyers. As a result, even small declines in housing prices caused many homes to go into foreclosure.

Banks bundled mortgages together and then sold them on the market as a financial asset. However, the risk level of these collateralized debt obligations was often much higher than the purchaser thought.

The ever$-$increasing debt obligations of the major economies of the world had to be collateralized. This unfortunately led to a dependence on mortgage$-$backed securities and increases in subprime lending.

In providing aid to firms that were at risk of becoming insolvent, the U$.$S$.$ government collateralized the debt obligations of these firms. In the future, firms are more now likely to engage in risky investments since the government collateralizes these behaviors.