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> Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said,
by hhs 7y ago
> Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage. Garbage in, garbage out.”
Is there a way to add incentives so investors don’t analyze information from summaries?
- toomuchtodo 7y agoMake fund managers partially liable financially for failure to do due diligence on the assets they’re investing in, versus relying on abridged information and credit rating agencies. You can’t fix people, only incentives.
- sailfast 7y agoCame here to post this quote. I don't understand how you would base your decisions on ratings agencies after what happened in 2008 and the fact that the incentives are still totally misaligned. The person quoted seems to indicate "investors" in this case means institutional funds as well, which is just frightening. Hope they can do their job otherwise this will go from big loss-causing mistake to contagion.
- cm2187 7y agoIf the summaries were false or misleading, the bank may be liable for any loss occurred , as for the bankers this may be characterised as securities fraud. So the incentives are for the summaries to be accurate.
- toomuchtodo 7y agoIt should be noted that only one person was incarcerated from the fraud that occurred leading up to the 2008 GFC.
- cm2187 7y agoI am aware of lot of losses that went back to the originating bank because of inaccurate marketing material.
- toomuchtodo 7y agoYeah, no disagreement that putbacks occurred, but those perpetrating the fraud aren't being held personally responsible. It's a slap on the wrist for the bank, cost of doing business. Call me when they're doing perp walks and handing out Maddof length sentences. Those are incentives to not violate securities law.
- zirpderp 6y agoInvestors are not given access.