Question

Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

A. Decrease in their exchange rates

B. Investments in U.S. subprime mortgages

C. Interest rate spikes

D. Currency controls

Answer 1

B. Investments in U.S. subprime mortgages

Step-by-step explanation:

This was an special mortgage with a higher risk for default. This mortage had a higher premium risk which, made them more expensive than other mortage.

This mortage were traded in the global market and ended being rated as AAA (low risk). This contaminate the entire financial system with uncertainty. When this mortages started to default the bubble explode and the market fell.

The agencies mantain their mistkae in secret and aduce surprise, while there are was indication of the underlying risk in the mortage and the CDO.