Banks became more willing to make subprime loans because of:

Question

Quizplus · Accepted Answer

The securitization of subprime loans made it easier for banks to bundle these high-risk loans into packages and sell them off to investors, thereby transferring the risk to others. This removed the traditional incentive for banks to carefully evaluate the creditworthiness of borrowers, leading to looser lending practices and the rapid expansion of subprime lending. The other options (leveraging and hedging) may have contributed to the growth of subprime lending, but securitization was the primary driver.

Banks Became More Willing to Make Subprime Loans Because Of