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Havoc in the financial markets
The tribulations of Wall Street are neatly summed up in a thought-provoking story (registration required) in today's Wall Street Journal. Here's a portion:
Eluded them because the banks failed to fully explain the risks investors were taking. That appears to be the irony. The paper reminds readers that U.S. investment officials have long advised foreign companies, especially in the Third World, to be as transparent as possible, thus giving investors the ability to hedge their bets. To do otherwise is to invite economic disaster.
Havoc in the financial markets
March 18, 2008
The tribulations of Wall Street are neatly summed up in a thought-provoking story (registration required) in today's Wall Street Journal. Here's a portion:|
The swiftness and virulence of the financial problems have been stunning. The problems are rooted in a bipartisan goal to figure out ways for lower-income Americans to buy homes, so that they could build financial wealth and plant deep stakes in their neighborhoods. But the instruments that mortgage companies devised included provisions -- interest resets after five years, no down payments -- that buyers didn't fully appreciate could backfire. When those subprime mortgages were bundled into packages of debt and sold to a daisy chain of interlocked financial institutions, the risks of those provisions eluded investors considered far more sophisticated than first-time home buyers. |
Eluded them because the banks failed to fully explain the risks investors were taking. That appears to be the irony. The paper reminds readers that U.S. investment officials have long advised foreign companies, especially in the Third World, to be as transparent as possible, thus giving investors the ability to hedge their bets. To do otherwise is to invite economic disaster.
Posted by David Farkas on March 18, 2008 | Comments (0)
Industries: Expansion
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