FEDS ARREST EX-BEAR STEANS EXECS OVER HOUSING COLLAPSE

I have spoken with many people who don't understand how investment bankers in New York caused the housing crisis. Let me give it a quick whirl.

As property values continued to climb in the early part of this decade, the risk for a sub prime loan temporarily diminished. Even if the borrower was in trouble, there home had appreciated and they could sell, payoff their mortgage and put some money in their pocket. Investment bankers approved more and more risky loans from lenders. Lenders created all kinds of funky mortgages. They were making a ton of money and every thing smelled of roses.
Investment bankers were selling these mortgages to all kinds of investment companies: Insurance, retirement, etc... There was a certain amount of risk given to a sub prime mortgage.
The demand for these investments grew. The investment banks said to the lenders, give us more. So, they created more niche products. Basically just started giving anyone a mortgage with out checking their income. The biggest problem was all the "investors," they were buying with no money down. They had no ability to repay the loan without a tenant.
The the wall came tumbling down. 10's of thousands of homes were bought by "investors" that could not make the payment. Thus where we are today.
What was criminal? The investment bankers were not disclosing to their investors, buying these loans, how the level of risk had increased. They sold them as mortgage backed securities. Not as "super crazy and risky securities."
In defense of the investment bankers, they may not have been aware of the fraud being committed by all the unlicensed loan officers.

just my opinion!

Jeff Cameron

Ex-Bear Stearns Execs Arrested
By TOM HAYS,
Posted: 2008-06-19 09:24:51
NEW YORK (June 19) - Two former Bear Stearns managers have been arrested, federal authorities said Thursday, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market. Matthew Tannin was taken into custody outside his New Jersey home on Thursday morning and Ralph Cioffi was arrested at his New York City home, the FBI said. Authorities in Brooklyn are expected to release details later Thursday on the case against the men, who are ex-managers of Bear Stearns Cos. hedge funds that collapsed last year. A law enforcement official told The Associated Press that an indictment naming the men was the result of a yearlong federal securities fraud investigation. The former executives are suspected of misleading investors about the risky subprime mortgage market, the official said, speaking on condition of anonymity because the outcome of the investigation is pending. http://money.aol.com/news/articles/_a/ex-bear-stearns-execs-arrested/20080619070909990001