Tag Archives: banks behaving badly

How the economy went bad, in one easy column

When someone asks if I can explain how the entire American economy fell into the dumper, I’ve typically tried to explain the phenomenon of collateralized debt obligations, or maybe recommended reading Michael Lewis’s The Big Short . (After you read it I guarantee that for at least 10 minutes you will understand exactly what a synthetic collateralized debt obligation is.)

No more. Now I’ll refer people to Paddy Hirsch and this excerpt from his book, Man vs. Markets . It’s a clear-language explanation of how the deeper in the banks got making potentially bad loans, the more money they made, and the more they had to make more potentially bad loans. Depressing but great reading.

Bad banks behaving badly

Apparently, banks don’t have trouble just with tracking who actually holds some of the loans they make. They also can screw up on tracking property tax payments on the loans they service–and then send borrowers incorrect threatening warnings that they owe taxes and could lose their home. Brent Hunsberger of The Oregonian has the story… Continue Reading