----- Original Message ----- From: "Doug Henwood" <dhenwood at panix.com>
"Not exactly. Goldman and the rest packaged dud securities and sold them to clients at the same time they were shorting the crap. They even shorted Bear Stearns' stock after Bear bought one of those turkeys. Also, in a bubble, people often can't see what should be obvious - that the forecasts were insane. Something like a negative amortization loan with low introductory teaser rates - in which the first few years of payments don't even cover the interest bill, much less reduce premium, only to be followed by a sharp rise in the interest rate - is clearly lunatic, but supposedly sophisticated people shoveled cash into them anyway. There are none so blind..."
Yes, indeed. There was also the plain fact that income was stagnant while house prices were growing steadily. Any appropriate model would have recognized the inevitable limit to the divergence between the two.
Joanna