Sub-prime Mortgages OR They believed that they were gods.
Mutual Funds - one of the components are sub-prime mortgages.
I haven’t found many people willing to discuss this underside of the market with me, maybe they don’t find it as fascinating as I do. The sub-prime market was packaged and sold to foreign investors as “A” paper, meaning that the loans that were considered “high risk” (i.e.: frequently late payers and/or those with collection accounts that managed to get a mortgage and/or “exotic” mortgages) was purposefully and misleadingly sold to foreign countries as “Prime Paper” (that is, perfect credit holders and low risk loans). I’ve been watching our global finances, waiting for this end to untangle.
In today’s paper, on the 4th page of the 4th section, the title of the article is “Panel backs new rules for ratings agencies”. Doesn’t look important at all.
It is. It is the foundation of your retirement, your investments. Look at your 401K Statements. Read the disclaimers - you’ll see the words “Mutual Funds”. The evaporation of your investment is largely due to this intentional misleading of sales of sub-prime mortgages.
>>A House committee voted (on Oct. 28th) to set new rules for investment rating agencies.<< The article continues to say that lawmakers believe (my emphasis) the agencies mislead investors by giving high marks to the securities tied to sub-prime mortgages. The proposal by the House Financial Services Committee is their “latest attempt to tighten the rules of the road for financial institutions after last year’s market crises.”
It’s already a crime to lie, to cheat, to steal.
I’m beginning to sound like a broken record…
We, as a whole, believe that the punishment is a deterrent to crime. Guess what? That’s not what criminals believe. If a criminal believed that he would get CAUGHT, he wouldn’t commit the crime (with that rare exception to those few that do want to stay “in the world they know”).
Do you think that Charlie Manson stopped and pondered the decades of years that he could spend in prison for the murders he committed? Was “Punishment” strong enough to deter him? We can argue that Mr. Manson is mad, crazy, a lunatic - of course the deterrent wouldn’t work for him.
Deterrents won’t work for the finance world either. Not by today’s standards.
By definition, the finance companies of today, the ones that led to our mortgage meltdown, are psychopaths. They believe the rules apply to everyone else; not them. Their arrogance, ego, greed allowed them to collectively make decisions that have directly affected you, me and the entire world.
No - we don’t penalize them, we don’t hold them accountable, we finance them. GMAC is applying for their third bail-out. CIT Group got a new loan, to keep them afloat. No one could touch them. No one would let them fail. They believed that they were gods.
To be continued…
