Saturday, March 23, 2013

Search for the credit crisis culprit - we seek him here, we seek him there

In the Weekend FT, Gillian Tett reports on research showing that a great many folk who were at the heart of the sub-prime crisis weren't great, grand schemers but were just as blindsided as everyone else (well apart from the handful of folk described in Michael Lewis's "The Big Short", some of whom attended the conference mentioned below on fact finding missions).

"How Bankers Believed Their Own Hype"

"... last week three American economists at Princeton and Michigan issued some startling new research – and it should make us all pause for thought. For if you look at the personal financial decisions of the bankers involved in securitisation in that period – at the very heart of the credit bubble – it seems many believed their own hype. Many of them not only bought large quantities of housing stock at the worst possible moment (ie in 2005 and 2006), but also did so in some of the most “bubbly” markets, such as southern California. They then failed to sell those properties in time – and thus were left nursing losses after 2007. Or to put it another way, the bankers who were repackaging housing loans not only lived by the mortgage sword, but suffered under it too."

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