Why did the subprime market become so profitable in the 2000’s?

Question

a. A whole new market for subprime loans emerged as the subprime loans were combined with insurance products into new types of derivatives and investment securities that were highly rated by credit rating agencies.

b. Bush signed the Commodity Futures Modernization Act that made banks investments in the derivatives market less transparent and not able to be regulated.

c. The government has always insured prime and subprime loans from default. During the 2000’s interest rates were very low which encouraged more lending and profits.

d. Subprime loans have always been a very profitable field because interest rates are so high to account for the higher risk of default

Answer 1

Answer is a)

I can explain the answer in a session as the explanation is rather long.