Question

how did subprime mortgage loans contribute to the global financial crisis of 2007 and 2008? multiple select question. banks were investors in subprime loans. investment companies borrowed money from banks to buy subprime loans. banks had to reduce their reserves as they wrote off bad loans. the interest rates on subprime loans were too low to make money for the banks.

Answer 1

Subprime mortgage loans contributed to the global financial crisis of 2007 and 2008 through banks' investments in subprime loans, investment companies borrowing from banks to buy these loans, and banks reducing their reserves as they wrote off bad loans.

Step-by-step explanation:

Subprime Mortgage Loans and the Global Financial Crisis

The subprime mortgage loans contributed to the global financial crisis of 2007 and 2008 in multiple ways:

Banks were investors in subprime loans: Banks invested in subprime loans, which were mortgages given to borrowers with low creditworthiness.

Investment companies borrowed money from banks to buy subprime loans: Investment companies borrowed money from banks to purchase subprime loans in order to securitize and sell them to investors.

Banks had to reduce their reserves as they wrote off bad loans: As borrowers defaulted on subprime loans, banks had to write off bad loans, which led to a reduction in their reserves.

The interest rates on subprime loans were not mentioned in the provided information.