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willing to profit at any cost and were deceived by the fact that houses collateralizing the mortgages were appreciating at a fast rate. As commercial banks came to realize that they can sell subprime mortgages to Wall Street investment bank giants, the rules on the playing field relaxed a little bit. Commercial banks knew that once the mortgages were sold to Wall Street, they would have made their money and transferred the risk of default on these mortgages. There was no incentive for commercial banks to stop giving mortgages to people who could not afford them.

Complex Financial Products:

Referred to by some as financial weapons of mass destruction, complex financial products including complex derivatives have certainly contributed to the fall of Wall Street. The subprime market brought with it a lot of opportunism from Wall Street's creative minds; the bankers found ways to profit from subprime borrowers. In their pursuit for making more money, Wall Street investment banks went out and bought mortgages including subprime ones from commercial banks and repacked them into newly designed securities called mortgaged backed securities (MBSs) through securitization. These newly designed securities were sold to investors around the world. Again, the greed of a get rich quick' scheme made Wall Street creative enough to come up with more ways to make money.

What investment banks kept on forgetting was the high level of the underlying risk associated with MBSs. The securities were backed by a stream of cash flows that was unlikely to be sustained in the long run because of the credit unworthiness of the borrowers, but as long as investor risk appetite remained high, there was nothing that could bring sanity to Wall Street bankers. Wall Street was taking a risky bet that risky mortgages would turn profitable; it was more like a gamble at a Las Vegas casino, except that the implications of losing this bet would be worse than anyone could have imagined.

Subprime lending brought with it increased homeownership. As demand for houses increased, the expected happened, housing prices increased and subprime borrowers found it difficult to refinance their homes. When reality sank in, the housing bubble led to subprime borrowers not being able to refinance the houses and therefore unable to repay their mortgages. Borrowers had no option but to walk away from the houses they could no longer afford to pay and opt for foreclosure instead.

Wall Street was left with financial assets in

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