Quote:
Originally Posted by pocketkangaroo
I think what you are talking about is a fundamental issue in the economy. The ability for these banks and financial institutions to take such risks with money they essentially don't have. To play games with the accounting figures to show inflated profits that don't exist to boost a stock price.
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The mismanagement of Fannie and Freddie is a true scandal and should result in criminal prosecutions. Those companies had a quasi-governmental guarantee yet they took huge amounts of risk as if they were a private hedge fund. They purchased a huge amount of risky mortgage loans from Countrywide Financial (coincidently at the same time Countrywide was giving sweetheart loans to the Chairman of the Senate Banking Committee Chris Dodd and the Chairman of the Senate Budget Committee Conrad Burns).
Fannie and Freddie should never have been in the business of underwriting risky sub-prime loans but because of Countryside's friends in the Senate they were able to get away with it. That is a true scandal. Dodd and Burns should resign at a minimum.
Lehman Brothers on the other hand was a private bank and had every right to take whatever risks the board and the executives believed were correct. That is also why Lehman should be allowed to fail.