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what can be done to prevent future blowups like the one that occurred in the subprime...

what can be done to prevent future blowups like the one that occurred in the subprime market?

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Answer #1

The activities or things to be done to prevent future blowups like the one occurred in the subprime market:

1. Reduced allocation of loans to risky borrowers. Before recession large allocation of funds was given to MBS(Mortgage Backed Securities) and due to housing bubble the prices crashed creating huge losses to banks.
2. Loans should not be provided to subprime borrower as they high probability of default since their repayment capacity is very low.

Please Discuss in case of Doubt

Best of Luck. God Bless
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