Which institutions took advantage of information asymmetry in the sale of sub-prime loans to investors in mortgage-backed securities?
A)The ratings agencies.
B)The Wall Street investment banks.
C)The Federal Reserve.
D)AIG (America's largest insurer).
E)None of these.

Question

Quizplus · Accepted Answer

Wall Street investment banks took advantage of information asymmetry by packaging sub-prime loans into mortgage-backed securities and selling them to investors without fully disclosing the risks involved.

Which Institutions Took Advantage of Information Asymmetry in the Sale