Banks Sold Risky Mortgages to Unaware Investors Before 2007 Crisis.
Depository institutions sold risky subprime mortgages to investors before the 2007 crisis. They targeted naive investors by transferring risk through securitization. By analyzing loan data, researchers found that banks sold riskier mortgages to investors, taking advantage of information not easily seen by them. This behavior supported the idea of cream-skimming in the subprime mortgage market.