With regard to the financial crisis: can someone explain the "toxic" real estate investments better?

The thing that I'm not sure about is if this is talking about buying at risk loans, buying properties that have been foreclosed and lost substantial market value, buying some sort of security that is related to all this, or something else entirely.



I realize it's all tied to the bad loans made in the real estate market, but I just don't understand what exactly this corporation the FED wants to create would be buying.With regard to the financial crisis: can someone explain the "toxic" real estate investments better?Many of the investments are derivatives which are financial funny-money. The value of these derivatives was based on the value of the underlying loan or the equity of a loan. So, what was often resold was the equity from loans 鈥?worthless once the underlying value disintegrated. Then, there were various hedge bets, or derivatives sold to manage risks. A single piece of property might be leveraged three or four times 鈥?often in opposing directions. Loans and various derivatives were bundled, sold, re-bundled, re-leveraged, and resold. Subsequently, much of this 鈥榩aper鈥?was never worth the paper on which it was printed. Of course, the increasingly clever actuaries and financial analysts designed these 'new' securities to be fully protected by the FDIC and other gov. agencies. Alas, there is much more to the 鈥榯oxic鈥?investment mess than mortgage defaults.With regard to the financial crisis: can someone explain the "toxic" real estate investments better?they traded mortgages and derivatives. All sorts of derivatives. So, when mortgages rolled over, so did the 'insurance' products. Thx.

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