More Subprime Analysis
An excellent post on the relationship between the ballooning interest rates, mortgage defaults and adverse selection:
…when the major cause of large-scale defaults is not the fecklessness of the borrowers but rather the fact that the market equilibrium has high interest rates that are themselves both the consequence and cause of high default rates, that the government has a market-making role to play by providing guarantees. This seems to me to be a good logic.
Bonus Link and another.
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