package the loans into bonds


Senior Member
Can somebody explain it for me, please?

"Banks irresponsibly lent to US households who couldn’t really afford the mortgages they were being sold, egged on by the massive returns to be made by packaging the loans into bonds by their investment banking arms."

Source: Bitcoin bubble? The warnings from history
  • Bondstreet

    Senior Member
    English (UK)
    "Packaging loans into a bond" means combining many smaller individual loan contracts (e.g. personal real estate mortgages) into a much larger single loan package (a bond), which can then be sold on to another financial institution, hopefully at a substantial profit.