re: #43 KGxvi

Interesting piece about the causes/misconceptions of the financial sector crash. Makes it clear, I think, that there were a lot of contributing factors and no good ways to deal with the resulting disaster.

And doesn’t even touch on the fact that we probably haven’t really fixed the underlying problems that put us there in the first place.

two big contributing factors:

micro
- decoupling loan origination from the long term servicing / collection risk (perfectly legal):
get the borrower ‘qualified’
skim the up front points and fees, then sell the loan
the 20-30 year risk of collection is now on the new owner of the loan
sure they had underwriting criteria they used to decide what loans to buy - still the up front mortgage brokers knows it’s not gonna be his problem - just get em qualified

macro
- credit default swaps