(03-26-2009 09:58 PM)STLouis Blazer Wrote:  

Quote:First off, if the underlying mortgages were performing, there would be no problem. None of this other stuff would matter if the mortgages were cash flowing the way they are supposed to. As a corollary to that, once the bad mortgages were made, some sort of crash became inevitable. All the packaging and credit swaps and all that stuff had a bigger impact on precisely who got taken down and when, but they didn't cause the crisis; it was inevitable by the time those things came into being.

Leverage doesn't add value, it only magnifies the outcome.

Good point. Actually, in this case doesn't add or subtract, just moves around. Take a chance at solving the problem, but if it doesn't work the results will be worse. And in this case, it didnt' work.