They were junk mortgages because they were given to people who had junk jobs: unsanitary conditions, no health insurance, or violations of the law, such as charging below legal minimums. While the housing market grew senseless, it seemed like a profitable business. But ten years ago the crisis of liquidity and confidence in the solvency of entities broke out and caused the greatest depression since World War II.
All financial crises have common characteristics. Banks invest in high-risk assets because of their high profitability, which work until someone says they are toxic and they lose their value and liquidity. The trigger comes when people ask to recover the money en masse due to the loss of confidence and the contagion effect accelerates. 2007 was no different. It started with subprime mortgages , it spread to other products and the banks ran out of capital to absorb the losses…
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