Leverage's Financial Crisis

Leverage is borrowing money to amplify the outcome of a deal. The financial crisis includes sub-prime mortgages, collateralized debt obligations, frozen credit markets, and credit default swaps. The way that leverage works in a normal deal is that someone can buy merchandise for 20,000 and sell it to someone else for 11,000 and they gain 1,000 in profit. However, using leverage if the same person with 10,000 goes to borrow 990,000 it will give him 1,000,000. He will then go buy 100 boxes with his 1,000,000 and sell them to someone for 1,100,00, pays back the 990,000 and 10% interest. This will give them a profit of 90,000. Leverage makes every deal better. The parties involved in the mortgage process are the broker, homeowner, lender, and