"DBLP financing tool, proposed by Goldman Sachs Group?" As soon as he heard that it was a new financial instrument proposed by Goldman Sachs Group, Qiao Tianyu instinctively became nervous.

You must know that Qiao Tianyu, who has worked on Wall Street for most of his life in the last life, especially Qiao Tianyu, who has worked for Goldman Sachs for many years, loves and hates the "financial innovation" of those big Wall Street investment banks led by Goldman Sachs!

The dictionary explains financial innovation as changing the existing financial system and adding new financial instruments in order to obtain potential profits that cannot be achieved by the existing financial system and financial instruments.

In fact, to put it bluntly, financial innovation in the popular micro sense is to reprocess and package existing basic financial products such as stocks, bonds, futures, and options, and give new attributes that basic financial products did not have before, so as to earn higher profits, and the products of financial product innovation are also called financial derivatives.

For example, take one of the worst financial crises in human history--- the subprime mortgage crisis of 2008.

The reasons for the subprime mortgage financial crisis, which began in the United States in 2008 and quickly swept the world, are complex, but the core cause of the subprime mortgage financial crisis is still financial innovation.

To understand the subprime mortgage financial crisis, we must first understand the meaning of "subprime mortgages".

In fact, it is very simple, the "subprime mortgage" in the subprime mortgage financial crisis refers to the subprime loan in the home mortgage loan.

To put it simply, the credit scores of borrowers vary depending on family conditions, income, historical credit history, and many other factors.

Some lenders have high credit scores, strong repayment ability, and low default risk, so their mortgages are "premium loans", that is, "premium loans".

Some lenders have low credit scores, weak repayment ability, and high default risk, so their mortgages belong to "subprime loans", that is, "subprime loans".

In fact, in a popular sense, housing mortgage loans are similar to stocks, bonds, futures, options, etc., all belong to the category of basic financial products, lending banks lend to lenders, and the lenders repay the loans on time within the repayment period.

Therefore, the mortgage is a lending relationship between the lender and the lending bank, and does not involve a third party.

This means that even if the lender's credit score is low and the risk of "subprime mortgage" is great, the lender is very likely to default and repay the loan.

But for the lending banks, it is only a default on a house, and they can take back the house, which is insignificant, and it is unlikely to cause a financial storm that sweeps the world.

Therefore, it can be seen from this point that the basic financial products, including the housing mortgage loan, are relatively independent, and even if a product fails, the threat to the entire financial system is not great.

But financial derivatives are a different story.

Let's go back to the subprime mortgage crisis of 2008.

For the lending banks, although they can sit back and enjoy the benefits after issuing the mortgage, and collect the rent on a fixed date, it is a very easy thing, but the lending banks are not satisfied with this.

Because of a very simple truth, the more housing loans issued by the lending bank, the more people will make money for the lending bank, and the higher the income of the lending bank.

But the cruel reality is that no matter how much money the lending bank has, there is a limit, and the house is very expensive, and for the lending bank, the mortgage they issue needs to occupy a lot of their funds.

For example, if a house in the United States is worth $1 million, and a lending bank lends 10,000 houses, it will take up $10 billion of their funds.

However, the mortgage is dead, if the lending bank's funds are all occupied by the mortgage, then the mortgage bank will not have the funds to lend more mortgages and earn more interest, which will not satisfy their dream of lending more mortgages to make more money.

So what to do?

Is there a way for a lender to lend an unlimited mortgage with the limited funds in hand?

This seems to be a fantasy to the average person, but it has been solved by clever Wall Street investment bankers.

Wall Street's big investment bankers have used financial innovation tools to develop a new type of financial derivatives MBS, which is actually asset securitization.

Here's how they operate.

To put it simply, an investment bank bundles the existing housing loans in the hands of the lending bank, whether it is a prime mortgage or a subprime mortgage, to form a large asset, and then uses these assets as collateral to issue bonds to the public or other investment institutions.

In this way, the issuance of bonds can bring back a large amount of money from the public or other investment institutions, and the lending banks can take these funds to lend more mortgages and make more money.

As a result, this process goes back and forth, and they can continuously create funds for the lending banks, thus obtaining their dream of lending unlimited with the limited funds in their hands!

However, it is easy for those who are interested to see the loopholes, the so-called MBS, in fact, is based on the initial basic financial products --- mortgage loans, and through the MBS generation process, the high-rise buildings of housing loans have been continuously built.

However, in the process of generating MBS, because the bundled mortgages have superior loans and subprime loans, this also buries a huge hidden danger for the high-rise buildings of the mortgage.

Once the subprime loan that is the foundation of the loan cannot be repaid due to credit default, then it will directly affect the bond repayment of the first tier of MBS generated by it.

The repayment of the bonds of the first MBS will affect the repayment of the second MBS, etc., thus forming a chain reaction that directly endangers the safety of the entire mortgage high-rise building.

And if there is a large-scale default on the subprime loan as the foundation, it is likely to directly cause the collapse of the entire mortgage high-rise building.

The collapse of high-rise mortgage buildings has been transmitted to all areas of finance through the investment institutions that purchase MBS bonds in the process of MBS generation, thus causing an all-round storm in the financial field.

And all of this really happened, as the U.S. base interest rate rose and the housing market continued to cool down in the new century, the phenomenon of subprime mortgage defaults in the U.S. financial market became more and more serious, and the subprime mortgage defaults eventually triggered the collapse of the first layer of MBS.

This caused a chain reaction, which directly led to the collapse of tens of trillions of high-rise buildings with housing loans in the United States, and finally triggered the subprime mortgage financial storm that swept the world.

The 2008 U.S. subprime mortgage financial crisis has been explained, and it is obvious that the main culprit of the subprime mortgage financial crisis is the financial innovation product--- financial derivatives MBS!