Tuesday, November 06, 2007

Business Smarts

Several issues of the latest series of WSJs have focused on the blood bath in the financial sector in relation to sub-prime mortgages.

When the subprime bandwagon was getting off the ground all I could think was "I sure hope the people who run my 401K are smart enough to realize that investing in ghetto housing isn't the smartest thing to do". I thought the same thing years ago when people were throwing money at tech companies that gave their product away. Umm, giving 4.3 billion to a company that doesn't even sell anything might not be the best idea. Likewise, there's nothing magical that happened on the planet to suddenly make unqualified home buyers suddenly liquid enough to purchase a house.

What kills me is that the European banks fell for the same bit. What am I missing? What did these idiots 'learn' in college that blinded them to the most simple of facts?

Further illustrating this absurdity is that Cleveland has another conviction under it's belt for mortgage fraud. It's not what you think though. How it worked is that corrupt lenders would team up with corrupt borrowers to get loans that they had no intention of paying on, all in an effort to bilk money from their 'betters' at places like Citibank and Merrill Lynch.

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