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Today's post is rather short since the link below is more important than what I type here. If you link to the New York Times site at http://topics.nytimes.com/top/news/business/series/the_reckoning/index.html, you will find a fascinating series (albeit long - after all it is the New York Times) of articles. These articles make it clear just what what brought the economy down, when, and why. It tends to concentrate on the business of the collapse, but it mentions a lot of the people who either brought about the collapse or failed to do anything about it.
Pay especial attention to Jason Thomas and his rent-versus-ownership analytic model. What's interesting about it is that it was so simple; no calculus, to convoluted statistics, no black-box programs. Just straightforward analytics. Just analyses that real estate appraisers should have been engaged in. Though only 29 years old a the time, he basically foresaw the collapse and warned the powers that be in the Bush Administration of what was to happen. But, by then, it was basically too late to make any serious repairs to the economy's pending implosion.
Note that these articles do not hesitate to mention that so many of the big players in the collapse, Merrill Lynch, Lehman Brothers, Bear Sterns, et al, all had significant positions in mortgages. mortgage-backed-securities and mortgage-backed- derivatives. The one step all of these Wall Street firms failed to take was that of recognizing that real estate prices do not and cannot increase forever (see reference to Jason Thomas, above). As we all now know, they didn't.
Check out, too, all of the references to the pay of the traders and executives at the big banks and banking houses. Then check out the references to the pay of those folks who oversaw risk at those firms. There is a grand canyon of a difference. Guess who got paid more?!
The articles do not mention real estate appraisers. That's a shame, since somebody had to issue an opinion that a specific piece of property had a value of $X on a specific date. Problem was, it likely did not since the value of the real estate was inflated by non-real estate considerations.
Enjoy the articles! You will find it sobering reading!
Pay especial attention to Jason Thomas and his rent-versus-ownership analytic model. What's interesting about it is that it was so simple; no calculus, to convoluted statistics, no black-box programs. Just straightforward analytics. Just analyses that real estate appraisers should have been engaged in. Though only 29 years old a the time, he basically foresaw the collapse and warned the powers that be in the Bush Administration of what was to happen. But, by then, it was basically too late to make any serious repairs to the economy's pending implosion.
Note that these articles do not hesitate to mention that so many of the big players in the collapse, Merrill Lynch, Lehman Brothers, Bear Sterns, et al, all had significant positions in mortgages. mortgage-backed-securities and mortgage-backed- derivatives. The one step all of these Wall Street firms failed to take was that of recognizing that real estate prices do not and cannot increase forever (see reference to Jason Thomas, above). As we all now know, they didn't.
Check out, too, all of the references to the pay of the traders and executives at the big banks and banking houses. Then check out the references to the pay of those folks who oversaw risk at those firms. There is a grand canyon of a difference. Guess who got paid more?!
The articles do not mention real estate appraisers. That's a shame, since somebody had to issue an opinion that a specific piece of property had a value of $X on a specific date. Problem was, it likely did not since the value of the real estate was inflated by non-real estate considerations.
Enjoy the articles! You will find it sobering reading!
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