Meet the Real Villain of the Financial Crisis

[Lynnie]

I was hoping you would chime in on this. I always learn a lot from your posts!!

I'm still trying to figure out what the heck a derivative is though

Derivative is the by-product of the actual mortgage created to entice investors. While once very simple, they are continually evolving with the industry and investor demands into complex vehicles.

 

[Linda]

Derivative is the by-product of the actual mortgage created to entice investors. While once very simple, they are continually evolving with the industry and investor demands into complex vehicles.

Thanks Lynnie - that's the best explanation I've seen. I have friends that lost a lot of money on those investments tied to risky mortgages. I've got a very conservative Warren Buffet style money manager so luckily was spared

 

[floridafarm]

Ultimately it is the responsibility of the individual to live within his or her means.

 

[Linda]

Ultimately it is the responsibility of the individual to live within his or her means.

Yep - and to look carefully at risk/reward when investing!!!

 

[Lynnie]

Thanks Lynnie - that's the best explanation I've seen. I have friends that lost a lot of money on those investments tied to risky mortgages. I've got a very conservative Warren Buffet style money manager so luckily was spared

If you're investing in Federal Agency Derivatives i.e. Ginnie Mae, Fannie, Freddie, you are pretty safe, particularly Ginnie Mae, which is completely backed by US Gov't. Fannie and Freddie are backed by the gov't by default - no pun intended.

The Goldman derivatives were not federally guaranteed, but seriously, they only sold to a few institutional investors. While what Goldman did was unethical, I have to wonder why the investors didn't perform their own due diligence. Crazy!

 

[beachFool]

This PBS Frontline Documentary called "The Warning" does an investigative treatment of the crash and casts a wider net of responsibility. Important people were pointing out the dangers and more important people were ignoring them.

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"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."