Asking the right question on mortgage products
January 25, 2013 1 Comment
On this issue of the Morgan Stanley ‘s**tbag’ emails proving the shocking and heretofore-unimaginable fact that banks (gasp!) Intentionally Tried To Sell Things To People For More Than They Personally Thought They Were Worth So As To Make A Profit, I had flagged this Dealbreaker post to respond to at some point.
But Kid Dynamite beat me to it so just go read him.
WTF were the BUYERS of these crappy products thinking? … See, once you can answer Levine’s hypothetical question about the internal emails of the buyers of toxic debt, you can actually figure out what the root causes were and fix them (if they need to be fixed at all… as I noted in a recent post, making bad loans isn’t – and shouldn’t be – against the law. This discussion seems to lead inevitably to a debate about the ratings agencies…
Well, exactly. But as the preceding link suggests, I’d go one further: it leads to a debate about government/regulatory policy because that’s the only thing that makes what rating agencies say so important in the first place. Of course, oh I forgot, that debate is ‘over’, government policy has absolutely no measurable effect on the mortgage market. Barry Ritholtz, Paul Krugman and other Smart People told me so.