1. Explain why relaxing mortgage lending standards (required by federal regulati

1. Explain why relaxing mortgage lending standards (required by federal regulating agencies,
Freddy Mac & Fanny May) resulted in Wall Street investment firms bundling thousands of
individual mortgage loans into larger packages, to re-sell instead of holding them as long term
assets.
2. Explain what happened to large investment firms that were bundling mortgage loans into
larger
packages, when the rising default rates of the mortgages in these bundles became noticeable to
Wall Street investors.
3. (True/False) Large Wall Street investment firms bundled risky mortgages into large packages
for re-selling, because they liked the challenge of turning risky decisions into large profits instead
of a massive default.
4. (True/False) The bankruptcy of Wall Street investment firms in July 2008 would not have
happened if traditional mortgage lending standards had not been relaxed in the mid 1990s.
5. (True/False) The incentive for companies in an industry to develop better products and
services over time – will be improved if their industry is regulated by a federal agency.