I think the bigger issue was betting against house prices dropping with broken models that said it was a 1:100 prob when, in reality, it was 1:20... then 1:5... then inevitable
-
-
-
Yea the banks were already betting on housing. The guys that took insurance against the housing bubble had relatively miniscule impact
-
Originally the bank bets were leveraged 1:1. You can lose a lot of money at 1:1 and be fine. After credit default swaps entered the market leverage became closer to 200:1.
-
Leverage was clearly a factor. But fractional reserving stretches back to the 1400’s.... but clearly not at 200:1.
-
Also the banks weren't obligated to sell them the insurance. It was their own greed that did them in.
End of conversation
New conversation -
-
-
This sounds to me like believing short sellers make companies go down, they don't, it's their own operational and financial inefficiencies that eventually make them go bankrupt. Same example goes with Soros and the BoE back in 1992 and so forth.
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
I don't know the numbers but something tells me the market of CDSs was way smaller in terms of size compared to the MBS, CDO and squared CDO ones. These actors did what's ethically correct, to burst the bubble and fix the market inefficiency and consequently profit from it.
-
Or perhaps I expressed myself wrong, they didn't burst it, the greed of those actors perpetuating such bubble and inner market mechanics burst it.
End of conversation
New conversation -
-
-
Ironically, even by mid 2008 the impairment of actual cash flows on those securities wasn't inevitable. Defaults in 2009-2012 are what did them in. And those were result of tight money and credit policy in Sept. 2008 and aftef.
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.