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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (423399)	10/16/2008 3:02:19 PM
From: TimF	Read Replies (1) \| Respond to of 1572373

It wasn't "fake insurance", it wasn't mostly fraud (of course fraud did occur, but it wasn't a major factor), it was insurance based on hedging strategies that failed when it turned out the risks where far more correlated with each other, and likely to go bad at the same time, then the insurers thought. And such misguided insurance strategies, where only one part of the whole problem. In many cases companies did rely on their own capital reserves to cover losses (but these reserves where to small compared to the amount of money in bad mortgages, so this strategy failed just as the insurance strategies did). A large part of this failure is related to the way the government treated risk and reserves in its regulation. In many cases it counted risky mortgages chopped up and repackaged as securities as having less risk than more solid mortgages directly held in one piece.