Watch the financial crisis video and discuss the following: (a) Discuss the meaning of the main concepts related to mortgage securitization: MBS, CDO, and CDS. Explain their role in the lead up to the global financial crisis (GFC). (b) The following parties are mentioned in the video: households, mortgage brokers, retail bankers, investment bankers, investors, insurance companies, the Federal Reserve, China/Japan/Middle East, rating companies. Identify and discuss any errors in the assumptions and behavior of each party. (c) Carefully discuss which party YOU think got out of the crisis with the least amount of damage, and why? Which party is probably the most affected, and why? (d) Discuss the effect of the government budget deficit on the equilibrium interest rates and the amount of investment.
