One Lesson from the Credit Crunch Is That

question 96

Multiple Choice

One lesson from the credit crunch is that

• A)in the aggregate,credit scores tend to understate the probability of default-thereby a pool of subprime mortgages is actually quite a safe investment since not every borrower defaults.
• B)moral hazard,while an issue in the market for used cars,does not seem to affect the U.S.financial system due to the effective regulatory environment.
• C)bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves.
• D)none of the options