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The crisis in a nutshell... "Oh, people who have defaulted on loans in the past. That’s why they’re called subprime," he informed me. "But if they
by DLWormwood 18y ago
The crisis in a nutshell...
"Oh, people who have defaulted on loans in the past. That’s why
they’re called subprime," he informed me.
"But if they defaulted on loans at 8, how can they ever pay back a
loan at 16 percent?" I asked.
"It doesn’t matter," he confided. "As long as they pay for a while.
With all that excess spread, we can make a ton. If they pay for three
years, they will cure their credit and re-fi at a lower rate."
That never happened.
While there are those out there who would look at the writer like a gun manufacturer whose product ends up in the hands of criminals, it's really all the fault of the people who made this greedy risk, practically knowing that defaults were going to happen anyways, that really deserve the blame in this mess...
- DLWormwood 18y agoGood grief... another plum passage... I asked my colleagues, what was a CDO exactly? Like CMOs, they were structured products, but the underlying collateral was not limited to home mortgages. They could be anything... "Diversity of collateral" was the pitch. Some things could go bad, but not everything at once. It never has, except during the Depression, and we’re so much smarter now. That could never happen again. Sorry for the self-reply, but this article has taught me more about this fiasco than all the press and commentary over the last year. An impressive piece of writing...