Banks' borrow-short-lend-long strategy backfired
Banks typically make profits by borrowing short-term funds and lending long-term at higher rates. When the mortgage-backed securities market froze, banks could neither sell their holdings nor use them as collateral for new borrowings. Large investment banks failed.
CONTEXT(Help)
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The Global Financial Crisis »The Global Financial Crisis
Immediate triggers of the financial crisis? »Immediate triggers of the financial crisis?
Sudden evaporation of market confidence/trust »Sudden evaporation of market confidence/trust
Banks' borrow-short-lend-long strategy backfired
Commercial paper market froze up suddenly »Commercial paper market froze up suddenly
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