Michael Lewis looks at the subprime crisis

[CrushinFelt]

This is probably the best article Bloomberg has ever published. So many gems.

[midas]

I think this article is really a parody on how Wall Street works - ie:

1. Create a financial model that everyone believes works lending 110% of home value with no money down to people who have really bad credit or investors trying to flip propeties in Florida, California or Las Vegas

2. Sell pieces of this deal to various investors who believe the model and want the high rates of return that come from lending to these people.

3. Completely panic and overreact when they realize that these people arent really creditworthy and they shouldn't have lent to them in the first place.

4. Beg the Fed to help them by reducing rates.

FYI - Wall Street made $$$Billions lending to "poor" people

The Wall Street journal had an intersting article about a working class family in Orange County whose combined income was $90K with a poor credit history. A few years ago they bought a $600K house and borrowed $600K and when the rates reset they couldnt afford the home anymore. They said they said they didn't understand the mortgage deal or that their taxes would rise dramatically after they purchased the house.

Without Wall Street, these guys can't even think of buying a home Orange County - should we feel bad for them?