As in the wake of Enron, there's now a lot of discussion about the collapsing subprime mortgage market as we all try to determine just what went wrong and who (if anybody) defrauded who, when.
First, there was a change in the law that allowed loans to be treated (and traded) far more freely, as if they were securities.
Unfortunately, the ultimate purchasers of the loans (such as hedge funds) didn't stop to analyse how the legal changes in the resale market had suddenly removed any incentive for the initial "lenders" (who were now really more like scouts than investors) to vet homebuyers.
Largely, although not exclusively, the large investment institutions who were hurt when the music stop "fooled themselves."
Or rather their hirelings profited (in the short term at least) from self-deception or a lack of "fiduciary curiosity",
to coin a term - while the firms who paid these bozos their bonuses lost an far bigger pile of money.
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