| | two things about the current crisis you may not hear much about are:
1) a few firms (S&P, Moody's or Fitch) had to be the ones that rated debt issuers (AAA, AA, etc). this creates a certain level of group-think among these firms. worse, it leads to the investor not thinking about what they are doing.
2) there was an extended, concerted effort to force banks+other lenders to provide mortgages to subprime borrowers. there were lawsuits, there were protests outside the houses of bank officials; it was intense! it all resulted in regulation that effectively forced banks to give loans to more risky borrowers. ...in part, this would encourage others to 'invent' mortgage-backed-securities, allowing the banks to get rid of the risky loans by selling them to other people.
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none of this explains 100% of what went one, but i'd be careful about supporting regulation OR deregulation.
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| | Posted 10/7/2008 9:56 PM - 63 Views - 0 eProps - 0 comments
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