|10-06-2008, 09:57 PM||#1|
Join Date: Jan 2003
Location: Twixt Hell & Highwater
60 Minutes Explains the Sub-Prime Disaster
I don't know how many watched it, but I found it very interesting. Know why a lot of people cannot explain wtf happened? Here's why:
These complex financial instruments were actually designed by mathematicians and physicists, who used algorithms and computer models to reconstitute the unreliable loans in a way that was supposed to eliminate most of the risk.
"Obviously they turned out to be wrong," Partnoy says.
Asked why, he says, "Because you can't model human behavior with math."
"How much of this catastrophe had to do with the instruments that Wall Street created and chose to buy…and sell?" Kroft asks Jim Grant.
"The instruments themselves are at the heart of this mess," Grant says. "They are complex, in effect, mortgage science projects devised by these Nobel-tracked physicists who came to work on Wall Street for the very purpose of creating complex instruments with all manner of detailed protocols, and who gets paid when and how much. And the complexity of the structures is at the very center of the crisis of credit today."
The CEO of ISDA, Pickel, was such a smug little bastard I wanted to reach through the screen and punch him in the throat.
|10-06-2008, 10:44 PM||#2|
Join Date: Jul 2001
Location: Hot Springs, Ouachitah
I saw that, probably the first 60 minutes in years, but anyway.
They created these derivatives that gave the impression that they were insured, by some kind of debt/equity "swaps".
So in effect, they were represented as insured, when in fact , they were not...except for AIG..American INTERNATIONAL group bought them.
I dont know enough, but it smells of fraud, making unsecured or uninsured debt look just the opposite.
"A trainee making 45,000 a year would have had the common sense not to bet the firm on mortgage contraptions that no one in the firm actually understood. That is not a deep point to comprehend. Somehow, through, I will call it a criminal neglect and incompetence, the people at the top of these firms chose to look away, to take more risk, to enrich themselves and to put the shareholders and, indeed, the country, itself, ultimately, the country's economy at risk. And it is truly not only a shame, it's a crime."
Last edited by watermock; 10-06-2008 at 10:50 PM..