Even most of those inside and outside the official sector who argued for stronger capital or other prudential standards did not appreciate the degree to which the secondary mortgage market had turned into a house of cards.
Graph 1  But first, it's helpful to understand why the Australian banks have typically paid a premium in this market. They obtain foreign currency by issuing debt offshore – including via bonds denominated in US dollars. They do this to help diversify their funding sources. It allows them access to deep, liquid foreign capital markets.