Which is the part did you think I didn't know?
I'm corresponding with people who are implicitly asserting that Wall Street "lied" about the risks of these instruments (whose loss of value Wall Street is being hit with, so the complaint doesn't make much sense, but whatever). The same people are saying that lenders/borrowers weren't the "real problem".
But if there is more risk than anticipated, it's because of the practices and behavior of lenders and borrowers. I'm simply pointing out that the complaint that (1) risk was greater than advertised/stated and (2) lenders/borrowers are not the primary reason for the troubles, is inconsistent.
While the article is well-written and expresses feelings that I agree with, I have trouble with the lack of action-orientation. I am pleased that Goldman Sachs refused to share their client list with him.
But there needs to be an outcry for adequate actions to punish the guilty and avoid a recurrence. Here are the contributors and the behaviours that some of them did to contribute to the problem.
Realtors
They work for a 6% commission and will tell prospects anything to try and get the sale.
Buyer/borrowers
They want to own a house and have been lead to believe that they can’t go wrong buying even if they have to exagerate their earnings.
Mortgage Brokers
They work on commission and are motivated to get borrowers cheap money from banks.
Bank Lending Officers
They work on bonuses and are motivated to close a large number of deals.
Bank Executive Management
They work for sales bonuses and know they can sell off mortgage loans to Investment Banks.
Investment Banks
They work on bonuses are are motivated to package up a large number of offerings and sell them for a fee.
Ratings Agencies
Their job is to make an independent assessment of Investment Banks Offerings and assign a rating that indicates the risk of principal losses.
Portfolio Managers
They work for bonuses and are motivated to generate the greatest returns for the amount of risk they are allowed to take.
So who is resonsible for the problem? All of the above. Who can avoid a recurrence? It seems like the Investment Banks have the responsibility to ensure that their offerings are properly rated. They cannot blame the ratings agencies. Who oversees them? The SEC.
Without the Investment Banks playing games with these offerings, the chain would be broken and the rest of the guilty chain would have had no point in continuing their collusion.