If there's anything to take away from Dr. Burry's story it's this: He read the prospectuses. He said that is why he went the way he did, and foresaw the subprime meltdown because he thought that the underlying mortgages that the derivatives were based on were bad on paper. If Dr. Greenspan wants to tell us that very few people could see this coming, and only a fortunate few did - that's kind of disengenuous. It looks like the people who foresaw the meltdown read the fine print. That does not sound like being "fortunate
Whether it's the individuals fault for taking a mortagage they could not afford when the rates adjusted, or whether investors should be reading prospectuses before they're investing clients money into these derivative products, the one thing that cannot be legislated is human behavior. We're all free to make stupid decisions.
We're left with what we can do legislatively. Require greater capital reserves so that when investments go bad, the bank can take the loss? Require commercial banks (those backed by FDIC and with access to Federal Reserve Funds) to abstain from proprietary trading?
Don't know, but doing nothing is not an option.
Read the Article at HuffingtonPost
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