The Gospels vs Modern Finance

Friday, December 8, 2006
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Bill Bonner hits a grand slam:

A man can make a fool of himself whenever he wants. Generally, he pays the price himself and the rest of the world goes on with its business. But in order to get a real public spectacle going you need to separate cause from effect. Because it is only when a fellow thinks he can get away with something that he really lets loose.

One of the great innovations of the lending industry during this period was that it broke the link between the person who made the loan and the person who would suffer the loss if the loan went bad. That was what made the housing bubble possible. While the marginal lumpen took out I.O. low-doc ARMs, the hedge fund, pension fund and insurance fund geniuses bought MBSs

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