This will be interesting to watch play out. It seems like the question will be, did the banks reasonably expect at the time that the toxic assets would lose value? Hindsight is always 20/20. Can you sue someone for making incorrect assumptions about the future? I hope not.
Caveat emptor, pronounced is Latin for “Let the buyer beware”.
Being a strong supporter of free market capitalism, Somehow I have a hard time feeling sorry for professional investment specialist who are working for a fortune 500 company who invest with the likes of Citigroup and Duetche Bank into risky mortgages. We all new that Subprime meant Subprime, didnt we?
As Michael Douglas proclaimed in Wall Street, “Greed is good” except in the case of all these people it didn’t work out so well for them, now they want to sue someone. They saw all these companies, banks jumping on the bandwagon and didn’t want to be left behind. At face value, I don’t know how they thought sub prime mortgages would work for the long term since the entire premise was wacky and full of risk. A prudent risk manager would have avoided getting into this hole, but plenty jumped right in and got caught. The perpetrators and Barney and Chris should be in jail right now, but they have skated.
The premise was that housing would continue to go up or at least not go down. Even subprime mortgages can be profitable as long as the underlying assets continue to increase in value. This was the faulty assumption. And the rating agencies put their best ratings on the billions of dollars of financial instruments backed by these mortgages, which was based on similar faulty assumptions. A lot of investors simply assumed that the rating agencies knew what they were doing, and bought these instruments without an appropriate amount of due diligence.
This will be interesting to watch play out. It seems like the question will be, did the banks reasonably expect at the time that the toxic assets would lose value? Hindsight is always 20/20. Can you sue someone for making incorrect assumptions about the future? I hope not.
Oopsie! Someone has some questionable assets showing.
Caveat emptor, pronounced is Latin for “Let the buyer beware”.
Being a strong supporter of free market capitalism, Somehow I have a hard time feeling sorry for professional investment specialist who are working for a fortune 500 company who invest with the likes of Citigroup and Duetche Bank into risky mortgages. We all new that Subprime meant Subprime, didnt we?
HOW ABOUT A LITTLE DUE DILLIGENCE?
As Michael Douglas proclaimed in Wall Street, “Greed is good” except in the case of all these people it didn’t work out so well for them, now they want to sue someone. They saw all these companies, banks jumping on the bandwagon and didn’t want to be left behind. At face value, I don’t know how they thought sub prime mortgages would work for the long term since the entire premise was wacky and full of risk. A prudent risk manager would have avoided getting into this hole, but plenty jumped right in and got caught. The perpetrators and Barney and Chris should be in jail right now, but they have skated.
The premise was that housing would continue to go up or at least not go down. Even subprime mortgages can be profitable as long as the underlying assets continue to increase in value. This was the faulty assumption. And the rating agencies put their best ratings on the billions of dollars of financial instruments backed by these mortgages, which was based on similar faulty assumptions. A lot of investors simply assumed that the rating agencies knew what they were doing, and bought these instruments without an appropriate amount of due diligence.
Plenty of blame to go around.