With all the talk about the bailout plan being debated in Congress, I’ve heard all kinds of reasons why people think the market is failing. I’ve heard it’s because of Fannie Mae, shady mortgage lenders, stupid consumers that can’t comprehend that their payments will go up eventually on interest only loans, President Bush’s economic policy, and a bunch of other bizarre explanations. I don’t believe the American public really has a firm grasp on why many of the major Wall Street firms and financial institutions are going belly up.
Steve Kroft of 60 Minutes sets the record straight on who really is to blame for the huge financial crisis our nation is currently facing. Kroft reveals the shadow market in which Wall Street firms sold bundles of risky mortgages as investment securities to investors at banks and pensions funds without disclosing the inherent risks. Inflaming the crisis even further, the same Wall Street firms then sold the same investors an instrument called credit default swaps which was supposed to insure against any defaults.
This piece is definitely a must watch for anyone trying to understand our current crisis.