ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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government bonds
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treasury bills
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S & P stocks
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mortgage backed securities
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utility stocks, such as water and electricity
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Detailed explanation-1: -The term toxic asset was coined during the financial crisis of 2008 to describe the collapse of the market for mortgage-backed securities, collateralized debt obligations (CDOs) and credit default swaps (CDS). Vast amounts of these assets sat on the books of various financial institutions.
Detailed explanation-2: -Securitization of home mortgages fueled excessive risk-taking throughout the financial sector, from mortgage originators to Wall Street banks. When U.S. housing prices began to fall, mortgage delinquencies soared, leaving Wall Street banks with enormous losses on their mortgage-backed securities.
Detailed explanation-3: -In the context of the 2007-2009 recession, the term refers to assets like mortgage backed securities and collateralized debt obligations that are illiquid and difficult to value.
Detailed explanation-4: -The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President George W. Bush.