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0 pointskasey_junk6y ago0 comments

I worked in that industry during that time period and its just not true that no one came forward. As early as 2003 Warren Buffett straight up called them “weapons of financial destruction”. In 2005, the World Bank released a report suggesting that the derivatives the banks were holding could cause a financial crisis.

I remember the day the yield curve inverted in 2005 because I was working for a company that made risk assessment software for MBS. Our call center blew up as the reports started showing how risky balance sheets were.

It’s a nice story that Michael Lewis writes in “The Big Short” about how only a few people made money shorting the crisis but a) its largely not true and b) its more the fact that shorting isn’t nearly as easy as HN seems to think it is.

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omarhaneef6y ago

To underscore the point you are making, part of the drama of the The Big Short was the creative ways people had to find in order to short that particular market (or those markets. I think one group shorted credit spreads and another was shorting an index of derivatives tied to the mortgages? Been so long since I read it).

theturtletalks6y ago

You’re right, it’s a bit much to say no-one came forward, but enough wasn’t done to catch what was going before it came crashing down. The comment I was replying to was implying people would notice discrepancies and we would be able to catch it.

kasey_junkOP6y ago

If Warren Buffet & the World Bank said that the BLS was cooking the books I bet it would be a big deal.