As a general rule, wherever you find a large group of people who are baffled by complexity, you will find a smaller group of people making a good living screwing them. It’s true with all complex things: insurance, cell phone plans, legal stuff, technology, you name it. But it has never been truer than with the mortgage backed securities that are currently crapping down the throat of the global economic system.
As I understand it, a bunch of geniuses used something called math to make it seem like a good idea to loan money to people who are unlikely to pay it back. But here’s the part I don’t understand: Who invested in these risky securities?
According to a recent piece on 60 Minutes, there might be $50 trillion invested in these exotic financial vehicles. So why didn’t anyone ever offer those investments to me? And why don’t I know anyone else who invested in them? And why haven’t I seen a crying widow on TV who wishes she hadn’t invested her life savings in them?
As I understand it, banks and mortgage brokers offloaded their crappy mortgages to these investors, thus transferring the risk from the system that makes loans to a bunch of confused people who apparently ran out of regular things to invest in. So why is the banking system in trouble if they moved their worst loans to other people? And who are these other people?
Do you personally know anyone who invested in these exotic securities? And if not, how did we watch so much coverage of the economic crisis without learning such a basic fact?