The benefits for originating bad loans exceeded the cost of the negative consequences... billions were to be made.
This amount of money was not ever possible or conceivable in the mortgage business prior to that point.
The only way it could occur was through the creation of a tremendous number of bad loans, followed by a bet against them. For just a small investment in a CDO or CDS, an investor could create huge incentives for mortgage lenders to seek out unqualified borrowers and lend them far too much money.
The benefits for originating bad loans exceeded the cost of the negative consequences – someone was paying enough more for bad loans to overwhelm the normal economic incentives to resist such forced bad underwriting.
Betting on good loans could never generate as much gain.
**********************
... not sayin it'll happen... but if there were any real justice in the world... all of these 'masters of the universe' would be relinquishing their fortunes, and spending good amounts of time behind bars!!
FCIC Report Misses Central Issue: Why Was There Demand for Bad Mortgage Loans?
