The Experts Are Off Again

So, now the whole mortgage mess was a fraud. The fraud is, that regulators as well as other facilitators, such as rating agencies and law firms stood aside and let the whole thing happen.

The fact of the matter is, the Street exists to make money. There was a ton of it to be made doing CMO's, CDO's and CDS'. The problem was, they went too far and broke the cardinal rule of doing these deals which should have been, find a buyer for the most toxic tranche of the deal before you step up and buy the collateral. I actually think that people at Lehman and Bear let themselves think that the housing market would continue to go up and lost sight of the fact that the crap that is sub-prime is exactly that ... crap, not worthy of a AAA rating regardless of over-callateralization. They bungled it when they became owners of the toxic tranches and kidded themselves into thinking that they could finance it until maturity.

Look back at my posts. 1. the rating agencies were way too naive, 2. Congress really dropped the ball by letting Fannie and Freddie (who should have known better) buy sub-prime and 3. the institutions who bought the paper had way too much faith in the system that had convinced itself that the single-family market was, in fact, one dimensional.

Now, I hope that Goldman will fight the SEC because its own complicity as well as that of the entire regulatory structure will be exposed for the incompetence that pervaded it.