ST Alpha - "LIR Dawson - bundling and seling of mortages meant poor lending practices by banks, ratings agencies had financial incentives not to look too closely," (Reading a Post)

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LIR Dawson - bundling and seling of mortages meant poor lending practices by banks, ratings agencies had financial incentives not to look too closely,

Posted by Roger More (aka RogerMore) Dec 14 '09, 09:03

mortgage bundles were too complex and not transparent so investors relied on ratings by the agencies, and of course everyone else was investing in these things so if you were a financial manager and you were not, you were fired.

Also, many loans/securities were not guaranteed by gov't, but investors treated them as though they were on the expectation that if there was a crisis the gov't would provide a bailout.

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[deleted] 3
- Ah - I took incentives to mean 'market incentives'. I think there was still an expectation that gov't would bail out - the S&L crisis of the late 80s - Roger More Dec 14, 09:27 2
  - and of course the implied gov't guarantees of Freddie Mac and Fannie Mae -- nm - Roger More Dec 14, 09:28 1
    - FRE & FNM are just as mush Shareholder greed culture to blame as the management.... the shareholders got exactly what they asked for. - scorpion Dec 14, 09:30
The bundling of the mortgages in and of itself was not the problem. The ratings agency issues are real and significant. -- nm - pmb Dec 14, 09:05 1
- The bundling of the mortgages itself was no problem. But the on-selling could be - for example, where the lender sold all the bundled mortgages. - Roger More Dec 14, 09:20

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LIR Dawson - bundling and seling of mortages meant poor lending practices by banks, ratings agencies had financial incentives not to look too closely,

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