What went wrong?

(The root cause of the issue)

1. Credit Suisse invested or capitalized in MBS from other banks, repackaged it and sold it
to the public at a profit.

What is MBS?

 Mortgage backed securities

 It is a debt security that is collateralized by a mortgage or a collection of mortgages that is traded on

the secondary market, and that enables investors to profit from the mortgage business without the need to
directly buy or sell home loans.

 Lewis Ranieri was considered as the “father of MBS” since he pioneered it and was named as "one of the greatest
innovators of the past 75 years” on 2004, but eventually strongly criticized for his role in the subprime mortgage
crisis of 2007-2009.

2. Michael Burry discovered that MBS are

becoming subprime (low credit rated) investments.

3.“Subprime”
As Burrydoesn’t
looked into
refer theinterest
to the files of MBS,
rates oftenwhich was
attached highly
to these rated using
mortgages, S&Pthe credit
but rather scale, he found
score of the
out there are several mortgages rated as 110 by the American FICO score.
individual taking out the mortgage. Borrowers with FICO credit scores below 600 will often be stuck with subprime
mortgages and their corresponding higher interest rates.

 An S&P credit rating is a letter grade. The best is "AAA." This rating means it is highly likely that the borrower will
repay its debt. The worst is "D," which means the issuer has already defaulted.
 Fair Isaac Corporation, or FICO, creates a variety of credit scores for use by lenders, credit card issuers and other
creditors. Your FICO® scores — which typically range from 300(low) to 850(high) — could affect whether your
credit application gets accepted, and the terms and rates you’re offered. The higher the FICO score, the better.