Why did the investment bankers think it was profitable idea to securitize bundle bad mortgage loans?
January 30th, 2010 | by admin |Kuntree asked:
First I don’t understand why banks would loan money to someone with bad credit or not having the means to repay. Second I don’t understand why investment companies like Bears Stearns would repurchase the loans from the banks. Securitize them and sell them as bonds. What are they learning at these prestigious business schools? How to be a licensed crook? The credit rating agencies are seem to be payed by not assigning the proper credit ratings. The country is falling apart because people don’t have the discipline to live within there means. Greed is running rampant.
First I don’t understand why banks would loan money to someone with bad credit or not having the means to repay. Second I don’t understand why investment companies like Bears Stearns would repurchase the loans from the banks. Securitize them and sell them as bonds. What are they learning at these prestigious business schools? How to be a licensed crook? The credit rating agencies are seem to be payed by not assigning the proper credit ratings. The country is falling apart because people don’t have the discipline to live within there means. Greed is running rampant.
One Response to “Why did the investment bankers think it was profitable idea to securitize bundle bad mortgage loans?”
By Stu on Feb 2, 2010 | Reply
The big problem comes in when the people originating the loans are not the people that end up holding the loans. They originator is getting paid to originate loans and frankly doesn’t care if the loans will get paid, because he isn’t going to be holding the loan – it will be sold to someone else. There is no incentive for the originator to do extensive checks to see if the person getting the loan can actually pay it off. All is good and fine if the housing market continues to go up as people can continuously refinance. However, that can’t continue forever and now someone must pay the price for this. That should be the loan originators and the people that applied for these loans.