The other organizations expected to make money buying these loan packages knowing what was in them, so it's hard to see why bankers are to blame.
It may also be a fair statement that the institutions did not know the value of what they were buying because of the way they were packaged. I thought that was one of the obstacles facing the bailout--how to value some/most/all of the troubled financial instruments involved. This lack of clarity seems to add to the risk.
> It may also be a fair statement that the institutions did not know the value of what they were buying because of the way they were packaged.
Are you suggesting that banks lied or that the buyers assumed that the risk was acceptable? If the latter, why shouldn't they take the loss? After all, they were willing to take the gain.
The bailout is occurring under different assumptions - we're insisting on looking under the hood more.
It seems as if they hid the risk, and may even have increased it, along these lines: http://unqualified-reservations.blogspot.com/2008/01/straigh...
Note that some of the slicing and dicing was intended to turn a pile of mortgages into two financial instruments, one with less risk than the original pile and the other with more risk. The two instruments would then sell for different prices.
And, are the buyers actually the financial illiterates that the "buyers didn't know" argument requires? I wouldn't call Merrill Lynch naive about money.