And this brings us to the true heart of the 2007–2008 crisis. If the mortgage production line was holding hundreds of billions of private label MBS and ABS on its own balance sheet, how were those holdings funded? Here too it was the new model of investment banking that provided the answer. If an upstart mortgage lender like Countrywide didn’t have depositors, neither did Lehman. Lehman got its funding wholesale by tapping the cash pools and so too would the new mortgage lenders, including Lehman. This was the truly lethal mechanism at the heart of the crisis. Funds from money market cash
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