Practice question · True or false
Securitisation made the financial system safer by spreading risk more widely.
Hints
- Spreading risk and spreading opacity are different things.
- If buyers cannot assess the underlying loans, the spreading fails.
Show the answer
False
Why
In theory, securitisation spreads risk. In practice, it spread opacity: investors couldn't assess the underlying loans, ratings were inflated, and the "spread" actually concentrated risk in leveraged institutions that didn't understand what they held.
Practise The Global Financial Crisis
The app has 7 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on The Global Financial Crisis
- The 2008 crisis began in a market, US subprime mortgages, far too small to bankrupt the world. How did it…
- Why did the GFC not become a second Great Depression?
- Post-crisis regulation raised bank capital requirements substantially. Why does that not make another…
- Subprime defaults were a small share of the mortgage market, yet the losses threatened the global banking…
- Sort each factor: did it cause the crisis or respond to it?
- Match each GFC concept to its meaning.