Home > Foreclosure > The Big Short

The Big Short

August 18th, 2010 Leave a comment Go to comments

I just read a terrific book about how we got into this financial mess, The Big Short, by Michael Lewis.  Hardly anyone expected these subprime loans to be paid back and they didn’t care because that wasn’t how people in the financial sector were making money.  They made their money selling the loans, trading the securities that made up the loans and betting against those securities, in other words betting that they were worthless.  When the amount of loans weren’t sufficient to fuel the market, they created “synthetic collateral debt obligations” that bore some relationship to the loans but weren’t made up of them (don’t ask me, they didn’t even understand them).  Some people are still making money off of the mess.  One investor is buying up loans at a discount and then turning around and offering to reduce the principle of the loans to the homeowners for a modest markup, thereby reducing the amount of their monthly payments.  It’s an interesting approach which you can read about at http://online.wsj.com/article/SB10001424052748704720004575377022447064474.html?mod=WSJ_hpp_MIDDLETopStories

What struck me in learning about all of this was how incompetent most major players were on Wall Street. There was no relationship between the money they raked in and their smarts. The only value was greed.

Categories: Foreclosure Tags:
  1. No comments yet.
  1. No trackbacks yet.

To fight spam, please answer this math problem before submitting: * Time limit is exhausted. Please reload CAPTCHA.

Contact Linda: lpiec@sbcglobal.net | 2021 Midwest Road, Suite 200, Oak Brook, IL 60523 | Phone: (630) 655-8783

This blog site is published by and reflects the personal views of Linda Pieczynski, in her individual capacity. It does not necessarily represent the views of her law firm or her clients, and is not sponsored or endorsed by them. The purpose of this blog site is to assist in dissemination of information about legal issues relating to building code enforcement, but no representation is made about the accuracy of the information. The information contained in this blog site is provided only as general information for education purposes, and blog topics may or may not be updated subsequent to their initial posting.

By using this blog site you understand that this information is not provided in the course of an attorney-client relationship and is not intended to constitute legal advice. This blog site should not be used as a substitute for competent legal advice from a licensed attorney in your state. This blog site is not intended to be advertising for legal services and Linda Pieczynski does not wish to represent anyone desiring representation based upon viewing this blog site in a state where this blog site fails to comply with all laws and ethical rules of that state.