Others have pointed out that there were not enough of these loans made to cause a crisis of this magnitude. In an article in Portfolio Magazine, Michael Lewis spoke with one trader who noted that "There weren’t enough Americans with [bad] credit taking out [bad loans] to satisfy investors' appetite for the end product." Essentially, investment banks and hedge funds used financial innovation to enable large wagers to be made, far beyond the actual value of the underlying mortgage loans, using derivatives called credit default swaps, collateralized debt obligations and synthetic CDOs. COUNT 5
QSN1 What financial innovation enabled investment banks and hedge funds to make large wagers? ANS1 credit default swaps, collateralized debt obligations and synthetic CDOs. QSN2 Credit default swaps, collateralized debt obligations and CDOS are all types of what? ANS2 derivatives QSN3 Which magazine had an article where Michael Lewis spoke with a trader about bad loans? ANS3 Portfolio Magazine QSN4 What financial innovation allows investment banks and hedge banks to make large wagers? ANS4 derivatives QSN5 What are some names of derivatives? ANS5 credit default swaps, collateralized debt obligations and synthetic CDOs