How To Lose Billions & Billions Of Dollars
January 22nd, 2008
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Over at Blown Mortgage, one of our favorite blogs, Michael explains how Wall Street operators have lost billions of dollars buying mortgage securities. The answer? Leverage.
FHA mortgages remain hot, however, as Michael explains: “The good news is we’re back to a conforming and FHA/VA mortgage market.”
You can understand that in the chase for maximized profits investment pros would want to use leverage. Michael explains how that works on Wall Street in the clearest possible terms. After all, why get 8 percent when you can get 50 percent?
While Michael’s explanation of leverage is clear, some things are not. For instance, did not the very smart people who run hedge funds understand that absolutely and inevitably, the market would turn? Where were the “regulators” who are supposed to oversee the investment community? Can we find examples of hedge fund operators who opted for less risk and more safety for client funds — and their own?
Success on Wall Street is not just important for investors, it also impacts public confidence levels. There is a public trust — or there should be — that justifies the regulation of banks and brokerages. But there is virtually no hedge fund regulation, and the oversight of banks and brokerages has proven to be weak, insufficient and ineffective.
You can see Michael’s full article at: Understanding Wall Street (Mortgage) Losses
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January 27th, 2008 at 12:24 am
That is exactly why fha and va exist so that we wouldnt get into this credit crunch