The story of the MBS and the transformation of the mortgage market has already been discussed in Chapter 7, but in the years preceding the crisis, the subprime market began overheating due to increased demand for investments by what economists have labeled a “savings glut.” Foreign investors flooded U.S. markets with money. This oversupply of cheap cash lowered U.S. treasury note yields, and so the money flowed into the next safest investment—asset-backed securities, or home mortgages.
